written by reader Bill Poulos options trades involving Apple

By backoffice, May 21, 2017

Travis, have you seen the the video by Bill Poulos that has to do with playing options close to earnings announcements. He claims to be able to make returns on this way of trading far more often
than losing on the trades. He buys what’s called a straddle which is an option and a put and claims the volatility prior and after earnings announcements provides an opportunity to make a profit
regardless if the stock goes up or down. I was wondering if you have seen this and what your thoughts are or if anyone else has any insight into this. Thanks.

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Travis Johnson, Stock Gumshoe
May 22, 2017 1:47 pm

I haven’t seen that specific ad, but this is exactly what thousands of professional options traders do all the time — there’s little reason to expect one person’s system to have a consistent “edge” over others.

I am not an expert on the options market and would call my efforts in this area “dabbling” — that said, my understanding is that generally the most consistent gains are made by those who sell options, not buy them. Doing short-term options trading with a bet on volatility over a short period of time is likely to be relatively inexpensive, but I would guess that it’s also likely to be minimally profitable — even the best technicians can’t tell you for sure whether AAPL (or whatever other megacap stock he’s trading options on) will move by 2% or 5% after any given quarterly release, and paying for both positive and negative moves means, of course, that your profit is likely to be at least halved if you’re right (since either the put or the call will expire worthless).

I’m skeptical of options trading services in general, not necessarily because their ideas are bad (some of them are probably good), but because options for all but the most popular stocks are so illiquid that there’s no way on earth to get a bunch of newsletter subscribers in and out of trades at good prices. That’s mitigated somewhat by trading only high-volume and popular stocks around earnings dates, when the options are also heavily traded, but “we can’t get the price they publish” is a pretty frequent complaint about options trading services of all stripes.

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