My question is what should I do before earnings report? I gave myself three options:
A) Sell and put it to work in something else like AMZN, FB, TWTR, etc.
B) Hold and let it run
or
C) sell an at the money Apr 27 call for another $30, about doubling the current profit.
I decided that option B was too risky. I didn't want to lose a winning position especially to earnings. I've been burned before by holding through earnings. I ended up doing option A and C. I sold 1 call and made about $35 on the call or about $3500. The second call, I decided to sell an at the money call at strike 1080 expiring Apr 27 for about $30, in essence creating a call spread and doubling my profit potential plus limiting my overall risk.
Given the short time duration and the earnings coming out at the close of market, this option would have a huge decay in premium right after earnings. AND my max loss was now reduced to $15 AND my max profit was increased from $3500 to now $6500 as long as GOOGL stayed above 1080. Judging from the after market action, I think I made the right decision. What would you have done?
Anyways, just another day in the office! Have a great day and happy investing!
