Over the longer term and in general, markets do one of two things. They consolidate or they trend (upward trends are called rally’s; downward trends are called corrections). Stocks, bonds, and other components of those markets go up and down on a daily basis within those consolidation periods or trends.
As traders, we need to define if we are trying to capture profit from the longer term consolidation and trends or the guts of the shorter term ups and downs. As a permanent bull and bear (bullearish), my take on shorter term trading (intraday to a few days) is to ignore consolidation or trends - the GG Overnight System or my 24 Hour Earnings Plays don’t care what the trend is.
While I do take medium term (days to weeks) positions, they are designed to capture profit over a wider range of price action and are based on either strong zones of support/resistance or a historical (1 year) pattern of price action or implied volatility. Trend or consolidation plays a minor role.
For example, in last weeks post for premium subscribers, The Naughty Corner (now unlocked for all subs), one of my planned plays was a SPY $425/435/445 call butterfly expiring on September 2nd. I entered as announced and will profit if SPY ends up trading between $427.41 and $442.59 over the lifetime of the fly.
Up to date risk graph courtesy of Toms Option Tools
The current SPY directional butterfly on Friday was at break even EOD. I am currently bullearish the next two weeks - maybe 51% bearish and 49% bullish, both of which I have theses. Monday next week will either confirm either thesis or consolidate more. At this point, it is better that I close my SPY butterfly. If SPY prints a red candle and closes below my fast eMA, so be it - I will close the trade for a very small loss. If it goes up, I'll make a small gain.
For all of my plays outside of GG or Earnings, I clearly identify my prognosis (up, down, sideways) as well as where that prognosis is “wrong.” This implies that there is both a bullish and a bearish thesis for directional plays. This in itself is my definition of being Bullearish.
Being Bullearish means that you have a plan based on:
Having a prognosis (up, down, or consolidation)
Having a target and time to target for the underlying stock or ETF
Having a line in the sand to identify when your prognosis is wrong.
Being Bullearish also means that you have done your homework and are flexible if the market tells you it is doing opposite of your original plan. Over the years, I have done massive amounts of backtesting, both via studying charts and price action and via options strategies (using Toms Option Tools as a backbone). This work has led to one of the core areas of my trading as well as a big focus of this blog, Green Goose Trader - the historical and assumed future behavior of some stocks and their options in and around earnings.
This past week saw three additional pre-announced plays, two in last Sunday’s post, The Naughty Corner, and one bonus play announced in the comments section of that post.
LOW 24 Hour Earnings Iron Condor. On Tuesday, 1 x LOW Aug12 $197.50/200/227.50/230 Iron Condor was entered for $0.72 each ($1.78 risk). LOW barely moved post ER and IV crushed the value of those Iron Condors was $0.08 each EOD on Wednesday for a $0.64 profit per contract. Nice win for the premium subscribers that played.
AMAT 24 Hour Earnings Iron Condor. On Thursday, 3 x AMAT Aug12 $103/104/114/115 Iron Condors were entered for $0.35 each ($0.65 risk). AMAT barely moved post ER and IV crushed. The Iron Condor expired worthless on Friday for a $0.35 profit per contract. Nice win.
DE 24 Hour Earnings Iron Condor (Bonus Play). On Thursday, 1 x DE Aug12 $347.50/350/387.50/390 Iron Condors was entered for $0.95 each ($1.55 risk). DE was volatile intraday but barely moved by EOD post ER and IV crushed. The Iron Condor expired worthless on Friday for a $0.95 profit per contract. Nice win.
META One additional left over play was exited. As readers may remember, I was in a META Aug12/Aug26 $160 Put Calendar and let the short Aug12 put expire worthless last week, holding the long put. On Friday, FB dumped and IV picked up. But I was not confident that it would decline enough next week to to offset accelerated time decay into expiry. I therefore closed the remaining puts for a loss. Premium subscribers were alerted of my exit.
All trade journal entries are courtesy of TraderSync, which is in my opinion, an incredible trade journaling software.
Since the beginning of this ER season, all closed Green Goose Trader pre announced alerts have seen a win/loss ratio of 68.57% and a profit factor of 2.52. Keeping my risk to an average of $250 or lower per play has yielded $1759 in profit (excluding commission). This result is on track and similar to the two previous ER seasons. Discipline and following my methodology to the letter will hopefully see continued success.
If current premium subscribers see value in this service, please let everyone know.
If you are not yet a premium subscriber, please consider going deeper and subscribing to receive advance notice of plays that have a historical success rate of 75% or greater. For the coming week, we have some very interesting opportunities - 7 actually. I plan on playing all of them.
Please join me for a live stream of the GG Overnight System rules at 9:00 PM Eastern on Sunday evening, 21 August (the recording will eventually be posted in the GG Alerts Substack): https://us06web.zoom.us/j/86469328440.
Earnings Iron Condors
SPLK
Entry: Wednesday, 24 Aug (Past performance 4 out of 4 wins), Exit: EOD on Thursday, 25 Aug
NVDA
Entry: Wednesday, 24 Aug (Past performance 3 out of 4 wins), Exit: EOD on Thursday, 25 Aug
MRVL
Entry: Thursday, 25 Aug (Past performance 3 out of 4 wins), Exit: EOD on Friday, 26 Aug
WDAY
Entry: Thursday, 25 Aug (Past performance 3 out of 4 wins), Exit: EOD on Friday, 26 Aug
Directional Pre-ER
ULTA
Calls - Aug26 expiry, Delta 25 to 40. Entry: Wednesday, 24 Aug (Past performance 4 out of 4 wins for an average of 79% ROI per trade), Exit: EOD on Thursday before ER, 25 Aug. Note - this will be expensive so I will likely only do one contract. However, unless the stock plunges more than 5%, IV will prop up premium. If needed, I will look to take a loss at $250 (mental stop).
Non-Directional Pre-ER (IV surfing)
This type of play takes advantage of dramatic increases of IV prior to ER. Losses generally are minor as IV props up premium. Note that they tend to be more expensive. Each has demonstrated 100% success over the past four earnings. I will take a loss at $250 if needed.
HPQ
Straddle (long at the money calls + long at the money puts). Sep02 expiry, at the money. Entry on Tuesday, August 23 EOD, Exit: Tuesday before ER, 30 Aug. Position size: $1000. IV will prop up premium. If needed, I will look to take a loss at $250 (mental stop).
OKTA
Straddle (long at the money calls + long at the money puts). Sep02 expiry, at the money. Entry on Monday, August 22 EOD, Exit: Wednesday before ER, 31 Aug. Position size: up to $1500 (likely to be only one contract). IV will prop up premium. If needed, I will look to take a loss at $250 (mental stop).
The Art of Being Bullearish
Good week. MRVL was a win. WDAY was also a win (but I wasn't in a trade). One single loser on SPLK (which lost $52). Total profit on the week was $416. Two plays are still open - HPQ (currently at a $200 profit) and OKTA (currently at a -$187 loss).
Stay tuned for my next post on Sunday. We have three plays planned for premium subscribers next week.
WDAY had too much risk per contract and I didn't enter. Ideal strikes were $143/148/175/180 for a total credit of $1.53 ($3.47 risk).