Let’s start by reminding everyone that today is the Last Chance to get in our our Earnings Trade Alerts for the Special Offer pricing of $99/year. Offer expires tonight @ 11:59pm PST, no exceptions.
Now, back to the topic at hand…
We started the day with a top three earnings trade candidates list including GOOG, SNDK, and RVBD. GOOG reported prematurely by mistake (for some reason “premature” and “mistake” seem to go hand in hand), so our list was narrowed down to two candidates.
With Oct expiration taking place tomorrow, the obvious choice for earnings plays is Oct options. Reason being, when trading earnings we want as little duration as possible since it’s an overnight trade.
Let’s break down why SNDK & RVBD are top candidates…
SNDK has 50 cent strike increments which gives Trader’s added strategic flexibility. Volume & Open Interest on the options is good enough to get a reasonalby quick fill. The 7-10 cent bid ask spread could be tighter, but it’s doable. Implied Volatility (IV) on Oct options is 139%, which is 2.75x higher than the historical IV of approx 50% (2.75x IV differential). That allows Trader’s to sell premium and get plenty of cushion by doing so.
RVBD options trade in 1.00 stock increments and also have enough OI & volume to get the job done. Bid ask spread is 5-10 cents, so pretty even playing field with SNDK there. The big difference is the 5x IV differential in RVBD. The Oct options are showing 275% IV vs approx 55% historical IV. That’s HUGE!
Both stocks have a tendency to move big on earnings, so a defined risk strategy is a must in our opinion. We chose RVBD as today’s earnings trade, but it wouldn’t be fair to Earnings Alerts members for us to share the trade here. Just wanted to give some insight into the thought process.