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Friday, April 22, 2016

Visa (V) April earnings play

4/21/2016 (12:50:48 pm, PT)

sell -3 April 22, 2016  $78 puts at $0.36

Why did I place this trade?
  • Visa was reporting earnings after the close on 4/21
  • implied volatility was relatively high
  • I was more bullish than bearish
  • 80% probability of success
  • expected move =  plus/minus $2.63

4/22/2016 (6:39:05 am, PT)  [expiration]

buy back all 3 puts at $0.05

PROFIT:  $93 (ONE day!)


  • I was REALLY lucky that the market makers let me buy back my short puts at $0.05 because that was lower than the "mid" price.  Thank you, market makers!
  • I'm REALLY happy that I closed my trade at $0.05 because exactly one hour later Visa dropped to $77.28.
  • Notice that I made money even though I was wrong "directionally."  This is due to post-earnings "volatility crush."