Previously I was long the $AAPL earnings trade as I put in my Twitter timeline.  Thankfully this played out after earnings as we are aware of their miss on EPS and downward forward guidance.  The price action from what I could understand is that it was  “baked” in to the recent selling as the volatility sellers looked like geniuses on Friday’s open.  $AAPL closed at 609.54 on Thursday and opened at 609.43 on Friday, so really no movement at all and predicted by just about no one as many expect a volatile move.

So going into the earnings reaction I posted in a blog this trade that was long the $AAPL Nov/Oct4 550/580 Call Diagonal spread, selling the Oct4 580 and buying the Nov 550 for a 29.20 debit or $2920.00.  The Risk Profile can be shown below:

After the earnings release I decided that I would like to roll the short option to the next month that would increase my profit from positive upside action from a $80 gain to a $280 gain at expiration 11/2 .  I then rolled the short call by buying back the Oct4 580 Weekly call and selling the Nov1 580 Weekly call for a 2.00 credit.  I could have received a better credit by $100 if I would have waited as $AAPL sold off shortly thereafter I rolled the short call, but hindsight is 20/20 and my downside expectations still held.  I have included the order entry as well as the new Risk Profile :

So you can see that the position is still positive and upon Thursday I plan on rolling the short call again to the next month on a dip (given that I am still in the trade).  I will be absent Friday (maybe some mobile trading) so my decision will be made Thursday.

On Friday I also entered into a $IBM 195 Call Calendar and the risk profile can be seen below:

My reason for this trade can be seen below on the chart.  I took into account it’s recent hit on earnings, stabilization, and a technical indicator that proved snap-backs prior occurrences (% above/below 10EMA) as shown in blue highlighted boxes:

So I entered into this position with a half position in case further downside occurred into which I would enter into another Call Calendar.  I want to iterate that this is not a volatility/income edge type play but more of a directional play.  $IBM is one of those stocks that does have a volatility index in itself and looking at the volatility chart you can see that we are in mid-range of recent volatility readings:

I believe that this is a trade that can see upside to $195 and this spread is more of a cost reduction type trade that benefits from time decay and upside action.  In the end I look to take around  25-30% overall profit on this trade.

Last night I posted in how I have no plans to go either way with this market as there seems to be a lot of tug and war and direction is not clear.  Today my morning consisted of morning admin catch-up that I usually save for the weekend.  But the morning action was a recording of previous days of where we saw a gap up followed by selling.

Today I did see a nice opportunity in $CRM as it was selling off and placed an order  for the 140/130 Bull Call spread at the mid of 2.65 credit.  This was to take advantage of the expected volatility decrease on a rebound off the 200 SMA and 142.50 support level.  Well this was the bottom and I  never got the fill.

Then obviously we had the news stock of the day of $AAPL that was set to report earnings.  I had no desire to take on an earnings trade but the more I looked at the chart, the more I starting looking at options strategies coupled with the chart.  In the end I placed an order and was filled 2 minutes later on an $AAPL Nov/Oct4 550/580 Diagonal spread.  In this spread I sold Oct4 580 Weekly Calls (expiring tomorrow) and bought the Nov 550 Monthly Calls for a 29.20 debit.  Usually I do not risk this much in an earnings trade but when looking at the chart and what the Risk Profile showed me, I liked the trade.

In this trade I looked at 550 as the max move to the downside.  I thought this was a safe max move and anything further than that and I find it hard to believe that there wouldn’t be buyers.  If $AAPL saw a move to the upside then at a minimum I would have made $80.00.  If we did see an extreme move to the downside, then I had 2 more expirations to roll the short call to reduce loss/cost basis.

More on my downside thesis.  $AAPL is a stock like no other.  This thing is a growth stock with awesome fundamentals.  Into the close it was nearly 14% off the highs with a tape that is not healthy.  So my thoughts going in were that expectations are high but this stock is still putting up numbers to make any company envious and the fundamentals in regards to price to growth, margins, and returns on assets/equity/investments are impressive, also there is no debt and the cash hoard is almost stupid to believe.  Needless to say it is an awesome stock fundamentally that has seen “wanting to get in on selling” even before the earnings.  Also on a technical basis with it coming into the 200 SMA and support levels if we saw more downside, it is just hard to believe that buying would not ensue.  Below is the 4 year chart to show some of the 2008-2009 calamity and how $AAPL has performed since hitting the uptrending 200 SMA (purple line)

So with this I went in wanting to get in if we saw a drop while also taking in some weekly profits if we saw an upside move.  So the Nov/Oct4 550/580 Call Diagonal made sense to me.  It takes advantage of the 580 call volatility crush while the 550 Nov call would not be effected as much on a volatility basis.

The Risk Profile and chart can be seen below with notes:

Also during the day I bought the $AMZN Nov 205/210 Bull Call spread for a debit of 3.75.  The thesis was kind of the same minus the fundamental thoughts.  I liked the chart technically and looking at support levels this made sense with the thought going forward that if we saw selling, I had two more expirations to roll the short calls.  Also this would take advantage of any positive earnings reaction.

After the close both companies released earnings and the price action made volatility sellers look like absolute geniuses.  The price action was gratifying to watch in both as both sold off right away.  $AAPL crossed below that 200 SMA and never looked back.  The hindsight thought now that $AAPL returned to its close after some selling is that the selling since Sept options expiration is priced in.  $AMZN moved up to an important support level and is hanging right there.  Should be an interesting day tomorrow and as of right now the $ES_F is -11.25pts (-0.80%) from the close and the tomfoolery continues.