Sunday, September 20, 2009

RIMM Earnings

RIMM reports Thursday, any ideas? IV is at a bit of premium to HV right now and it's slowly rising, but it hasn't spiked significantly. There's still three days until they report though, so anything can happen. The question is, do I sell the OCT strangle tomorrow and capture more theta or wait until Wednesday in the hopes of capturing more vega? I'm thinking about the 70/100, even a front-month would net you over $2 in premium and the strikes are comfortably(relatively) spaced, although the stock has had several large gaps in past earnings. Could always put on a long straddle also, but the ATM premiums seem a little steep.
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7 comments:

  1. MikeSeptember 21, 2009 at 4:31 PM

    Justin, I haven't done much with strangles so my input wouldn't be very useful. I'm curious to see how it works. Did you put it on? I'm going to start working on these in my paper account.

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  2. JustinSeptember 21, 2009 at 6:54 PM

    I'm inclined to wait until Wednesday to put this one on, IV is still rising steadily so I think Vega would overcome Theta at this point, especially with a farther-out expiry month.

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  3. ShawntaSeptember 22, 2009 at 6:57 PM

    I have 2 partially paid-for puts that I'm turning into an inverted butterfly for the earnings report. Sorry, I haven't priced any short iv trades.

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  4. JustinSeptember 22, 2009 at 8:13 PM

    I'm putting on the NOV 70/100 short strangle tomorrow, it's a $3.71 credit.

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  5. ShawntaSeptember 23, 2009 at 1:02 AM

    ok...I couldn't resist. I placed an order for an inverted calendar with a bullish skew. I can't place a strangle in my ira...so I'm stuck with inv calendars.

    -1 Oct 85p
    +1 Mar 90p
    for 8.70 credit
    (it looks like I make a nice return if RIMM IV falls by 20%)

    +2 Oct 100c
    1.06/contract

    net credit is 6.58. I have a ton more credit I could use, but the risk graph looks great with a decrease in IV by 20. So, I'm just trying to get luck on a couple calls...if RIMM makes a bearish move, I might bull put the spread 100/105 or butterfly it, or leave the contracts to work...it's only 200.

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  6. JustinSeptember 23, 2009 at 8:25 AM

    The more I look at past earnings gaps on this one the more worried I get. 3 reports with -14, -21, +11 point gaps since last June, 2 reports with no gaps to speak of. I may wait until tomorrow afternoon to get in, to see where the price is just prior to close since I'm only going to hold through the crush. I wonder how the VIX level affects gappage, if at all? It's currently at a 12+ month low so maybe it has a "calming" affect on stocks? Just a theory.

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  7. JustinSeptember 25, 2009 at 9:50 AM

    So I ended up putting on a NOV 65/105 Thursday afternoon, for a $2.19 credit. Stock gapped way down and opened at $70.48 so I immediately bought back the call for a dime, a 1100% gain on that side. Now to wait for it to fill in so I can cash in the put.

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