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."