Earnings, earnings, earnings.........

Here is the update on the GS trade:

The trade is up a very modest $44 on  $968 of risk but if GS can just hang around here for 30 days then I can make a bit more according to my risk graph which is in day step mode (each day represents 8 days of time passing). I will just hold for now but a lot will depend on the overall market. Technically GS is right near resistance at 150. Remember this GS trade is using August options and not weeklies.

Just before I went to bed last night I decided to put on a speculative earnings trade on AAPL. I was slightly bearish on the stock so I decided to go for a 1/3/2 unbalanced call butterfly using 250/260/270 strikes (knowing that it would give me short deltas and short vega heading into earnings) using the weekly options. As it was, I felt that I didn't have much of a chance getting filled as AAPL was at 246 and the trade was fluctuating around $0.08 - $0.20 debit. Anyway I decided to put in a couple of orders anyway. One was for 2 contracts at even and another was for 1 contract for $0.06 debit (I know this is breaking my rule on this type of play but I was kinda hoping to get one trade on last night - I really need to practice a bit more patience and discipline). Well upon waking up this morning I found that I got filled on both trades. Here is how it looks.

AAPL reported stellar earnings last night after the close and the stock is now up 9 bucks to finish at $259 which is right at my short strike. From the risk graph it would appear that my trade is now doing quite well - extremely well in fact but we'll have to see what happens on the open. My plan at this stage is probably to take most of the trade off even though these options expire on Friday meaning I get some big decay over the next 2 sessions. My intuition tells me that institutions will be all over AAPL when the normal session get's under way tomorrow and I expect some follow through but possibly not before a bit of profit taking on the open (gap will be faded slightly). I note that there is some resistance at the 262 area so perhaps I might take a wait and see approach to this one.

Morning Update

Market is all over the place at the moment after gapping down big, it has bounced a bit off the 1050 level on the ES. Internals are still fairly weak. Cumulative ticks were down right off the bat and now are back up positive and kind of oscillating indicating it's probably going to be a mixed day. Apparently the "locals" (floor traders) were short in the S&P futures pit and were forced to cover as "paper" (brokers acting for clients) started to buy - (You can listen to this audio feed from Trader's Audio or as a free service from the market cast chat room in TOS delivered by the always great Ben Lichtenstein).

As for my trades, I exited GOOG today for $1.57. Reasons were that I didn't like the big volatility today and the fact that GOOG has bounced nicely off 459. Also and more importantly it doesn't take much for a $460 stock to move $10 in a day. Current implied volatility levels give an expected move (1std deviation) of $9. Therefore you want to take profits when you can especially when most of the money made in the trade was due to falling implied volatility levels after earnings. As for the GS trade, that is working out nicely as the stock has recovered from the early weakness. Therefore I'm likely just to hold onto this and see how it works out.

At this point in time, I feel like it's prudent to trade smaller as the market seems a bit uncertain here and we could be in for some more volatility. Only trades I like here are longer term high prob iron condors 55 plus days out where I can get very wide break evens.