Mu stock options trading
MU that do not rely on stock direction. It turns out, over the long-run, for stocks with certain tendencies like Micron Technology, Inc, there is a clever way to trade market anxiety or market optimism before earnings announcements with options.
The goal is to benefit from a unique and very short time frame when the stock might move 'a lot', either due to earnings anxiety stock drops before earnings or earnings optimism stock rises before earnings , but taking no actual earnings risk. This trade is not a panacea, which is to say, we have to test it, stock by stock, to see when and why it worked.
We start with Micron Technology, Inc. We are testing opening the position 3 trading days before earnings and then closing the position on the day of earnings. Since MU reports after the market closes, this back-test does not making any earnings bet. This is not making any stock direction bet. Here is that setting:. If it was, the trade was closed. MU over the years but only held it before earnings we get these results:. We see a That's a total of just 16 days 4 days for each earnings date, over 4 earnings dates.
While this at-the-money pre-earnings straddle strategy has an overall return of This is it -- this is how people profit from the option market -- finding trading opportunities that avoid earnings risk and work equally well during a bull or bear market.
Tap Here to See the Tools at Work. You should read the Characteristics and Risks of Standardized Options. Trading futures and options involves the risk of loss. When you are searching for a covered call, you can analyze it in 2-different ways.
You can look for a stock that you are interest in purchasing and then see if the value of the calls options is attractive, or you can scan for a covered call using option trading software like Option Samurai. Either way, you still need to analyze both the option information as well as the chart technicals to determine if the trade is attractive. There are several criteria that are key to finding a robust covered call.
One of the first, is determining if you want to term of the option to extend through an earnings date. There are pros and cons of having each, but you are subject to a lot more actual volatility after and earnings date, and although you get some downside protection from a call option sale, it the protection is not significant.
If you do extend the option through the earnings date, the implied volatility is likely to be higher. You want to make sure the option is liquid so look for volume of more than 5, An option expiration of 3-weeks or more should give you sufficient premium. Here you could consider a covered call sale that would include: Alternative, you could also go to your dashboard and look for alternative covered call scans, using this scan as a guide.
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