I wish every example that I used to make a point worked out this well. (Refer back to the previous post when I entered this stress-free, pre-earnings strangle trade.) As it turned out, price action for NVDA was the main reason for the impressive gain as this five day chart shows...
although if you compare the implied volatility chart (below) with the one from the previous post you will see there was an increase which can offset that option price-eating greek called theta.
Looking back at the combined price of the call and put we have this...
Friday (at the open) .70
Monday (at close) .76
Tuesday (at close) .81
Wednesday (at close) .90
Thursday (@3:30 pm) 1.19
Remember to move the decimal point over two places to the right since we are dealing with one option contract (100 shares).
Not a bad way to make 70% in five days using a (sort of) neutral trading strategy.
Of course, there is no guarantee that past performance will be indicative of future results as the legal baboons often say. Next time, maybe I'll place a losing trade using the same strategy to show that the downside isn't usually too steep, hence the stress free description of this trade.
Once you have an understanding of the basics of options trading, and if you happen to be a mathophile this book my be useful:
The Volatility Edge in Options Trading by Jeff Augen
No Bart was harmed during the writing of the The Pre-Earnings Strangle part one or deux.
