Sell the Apr34/36 call credit spread at 1.00
Expired today at max profit at 0.00
assumed a 10lot in spreadsheet for $1000 profit . spreadsheet
4/5/2012 - trade looks to be profitable by about 30% today. will book a profit in my spreadsheet when i see scott closing it out on-air or via twitter. otherwise will monitor till opex
4/2/2012 on tonights fast money, scott nations recommended selling a call credit spread..."he loves selling credit spreads ahead of earnings" i believe were his exact words. ive got a couple of issues with this. if you have been following me you know that i rarely sell / hold credit spreads into earnings. mainly because you have no clue what will happen. although its a valid strategy, i just dont do it often, i am wrong as much as i am right, but when im wrong i tend to be wrong big time..not just a couple cents. scott recommended:
Selling the Apr 34/36 call credit spread for $1.00 ($100 credit per one-lot)
Max profit if on opex stock closes below 34, max loss if it is above 36..like he said, risking $100 to make $100. As of tonight, the Trademonster analyse tab shows this spread to be at 44% probability of max profit, so that puts it even below a coin toss of 50-50.. with stock currently at $34.50.
Secondly, (i dont follow this stock), looking at IV, its only in 45 range..nothing really huge.. pricing in about 1.50 ish move. there will be some volitilty crush but not alot since its not extremely elevated to begin with. just seems like an odd stock to do this spread with.. if you look at chart there is no "run up into earnings" that you would expect to see if you do this strategy. been sideways for 2 weeks
Third, earnings.com shows earnings to be on thursday. you would assume many (more than 1) viewer will see the show and run right out and put on this spread in the morning.. i dont know why cnbc / scott decided to mention this stock tonight.. 3 days away. if you were going to put on this spread as an earnings play because of a bearish thesis, it would be prudent to wait either to the day prior or day of the earnings report.. the stock might be up by then..crazier shit has happened...so those people that put trade on in the morning would be sucking if stock was at 37 on thursday...already near max paper loss.. point being wait till right before earnings to put on a credit spread in order to base your strikes on where the stock actually is.
you could put this on and stock drops but with a spread showing less than 50-50 chance of max profit i would not do this trade.. there are other low premium strategies you can put on instead of risking $100 if you are bearish... would be a no-trade event for me ... "if you dont have an advantage, dont make the trade"
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