With powerful earnings from INTC and an almost 400% return in AAPL January options. I opened a play in FB. FAAMNG stocks were back in favor around the 2 week of January in anticipation for earnings.
I opened a position in FB 270 expiring January 29 in anticipation of a run-up to earnings. I also plan to sell day of earnings on January 27. This has been a very easy way to skim the surface of earnings without actually having to risk the volatility crush and earnings disappointment.
There is a feeling of missed opportunity every time it sky rockets (FOMO), but I have also experienced risk of earnings disappointment and great loss, especially in Facebook. When looking at earnings, I have to both maximize gain but also minimize risk.
So for this tutorial, I bought FB the Friday before earnings (5 days before earnings). I watched it go up and down. The dip on Monday scared me. This lasted between 11-11:10am which was so fast. But the recovery in the afternoon has been remarkable.
Imagine a game of Texas Hold'Em or Poker. You can't make money unless you're in the game, but you can't always win them, people can bluff you, you might hold a weak hand, your opponent might have a stronger hand, but in Hold'em you also have the random cards the dealer flips over (the Flop, the Turn, and the River Card). Sometimes those cards can help you out, other times they don't. But you won't know unless you stay in the game and call at each turn.
Holding options until the day of earnings is similar to that. Each day as you approach it is like the Flop and the Turn cards... and the day of earnings is like betting on the River card. In most instances this is a 50/50 endeavor. But in order to see the Flop and Turn, you gotta be in the game.
My plan is to sell on January 27 right before closing. I have also noticed that most stocks rally at the close especially into earnings.
Coaching Lesson #1 You can't make money unless you're in the game.
Coaching Lesson #2 You can make lots of money on risky bets, but the inverse is also true (you can lose lots of money on risky bets). Minimize your risks.
