Live Trading Videos
Each of these videos are made without the luxury of looking in the rear-view mirror.
| 25/09/2006 | A beautiful opportunity with RHAT Results – 72% profit |
| 12/09/2006 | Another important HV lesson with Lehmann Bros |
| 11/09/2006 | Bought NAV October strangle for $1.40 Demonstrated an important HV lesson with Goldmann Sachs My NAV trade ended up with about 10% profit, minus the cost of commissions. A couple of other traders made more than 25% and up to 55% because their exits were better timed than mine were. They held a day longer.  |
| 05/09/2006 | Bought MATK October 30 straddle for $4.10 at 10am 2 days later sold the puts for $8.10. Still holding the calls. Sorry did not create video … kept getting tongue tied and gave up. I think the two lessons about HV above this should cover what we learned in this trade anyway. |
| 17/08/2006 | Live trading and analysis – placed a trade on ADSK Results (after two days) |
| 16/08/2006 | Live trading and analysis – many lessons learned Results (day 1) Results on day 2 … even though we decided not to trade BKS, we followed it because many of my friends did. They managed to claw a few cents profit from the trade on the second day, and were happy to close off for a little more than break-even. |
| 15/08/2006 | 50% profit on DAKT |
The videos above use a graphical option pricing tool for creating the theoretical profit and risk scenarios. A similar tool is coming soon to Trade Alert, so watch out for it coming soon!
1.
SL Gan | September 30, 2006 at 3:18 am
Hi! Ben,
VTS is due for earnings announcement on 4-Oct. Currently VTS’s HV & IV is quite far apart, with HV way above IV. IV is about 22%, and HV is 51%. IV is at lowest now. What volatility should be take for calculating worse case scenario? Any advise? Or may be it’s too early now, we should see whether the IV will go up more in days to come before earnings announcement.
Just thought this is quite interesting to monitor how it will turn out.
Gan
2.
Benjamin Boyle | September 30, 2006 at 3:33 am
G’day Gan
Interesting little stock, isn’t it!
In my opinion, IV will definitely drop no further, so you have no IV risk at all. Well done on spotting that.
There is a reason that IV is so low … investors are not expecting the stock to jump. Can you check the company news, and make sure it is not entering a merger or about to be acquired?
Historically, the stock is such a great jumper … what a conundrum!
Also check the news around where VTS made that huge gap a couple of weeks ago … see what caused that gap.
As far as I’m concerned, if the company’s options are not about to disappear due to upcoming corporate action, I’d try and get the $65 straddle as cheaply as possible when the stock is exactly on the strike. You have plenty of time before it announces to get a really good bargain.
The low IV should make you suspicious. But because of low risk anyway, I’d be happy to have a punt.
If the stock does jump, and there is no corporate action about to happen, IV will shoot up, (contrary to the belief that IV always falls after earnings) … potentially making your position more profitable than most.
This is a very interesting situation … anybody else wanting to comment is very welcome!
Cheers / Ben
3.
Benjamin Boyle | September 30, 2006 at 3:46 am
OK. I couldn’t resist. Looked up the news myself.
VTS is getting bought out. That’s why its shares popped up on 5th of September.
I have never seen this scenario before … I expect that the takeover news will squash any stock price jump, no matter how earnings turn out, since the company value has been fixed by the agreed take-over price.
Let’s watch and see
Cheers / Ben
4.
Benjamin Boyle | September 30, 2006 at 3:47 am
In plain english, that means, “don’t buy an earnings strategy straddle”
5.
SL Gan | September 30, 2006 at 3:57 am
Yes, will see how this one develops, would be interesting to observed.
From the news: “Massy, France-based CGG said it will issue $75 a share in cash or 2.25 of its American depositary shares for each share of Houston-based Veritas. The company said the offer, which will be paid out 51% in stock, gives Veritas holders a 35% premium over the stock’s 30-day average close. The offer also gives Veritas holders a 21% premium to Friday’s close of $62.18. ”
Gan
6.
SL Gan | October 9, 2006 at 3:13 pm
Well.. needs more patience in following this one. As of today, 3 trading days after the earning announcement, the straddle is still losing money if one has bought it on 4-Oct for earning’s play. When I first notcing it, the straddle was about $3.05, I know it was higher on the day it announced, whihc was AMC. Curently the straddle’s bid price is $2.65, and ask price is $2.95.
It may or may not go any further. I would be interested to know and will check for the rest of the week.
This seems like a good one to learn about earnings actions/reactions on stocks and news that affects them.
Gan