11:20am (EST)
As an option trader there are certain things you can and cannot control when it comes to the market. For every trade you make your decisions will determine your profits and how well your option portfolio performs.
The time you spend planning a trade does no good if you have a profitable play and then give it all back to the market. It means you have spend hours or days doing the legwork on a winning trade and you did all that work for nothing. Not only do you NOT get paid, you actually lose money. (I’m sure English majors loved that double negative sentence but it’s the truth).
The biggest thing to remember is that there will always be trading opportunities. When you have a trade that is up over 50% in a little over three days a lot of novice option traders take risks that lose them money. Then they wonder why they can’t win when trading options.
That is the deal with one of the current trades I have been profiling. Amazon.com (AMZN, $81.40, up $2.40) got another “upgrade” today, ahead of earnings, which is making me cautious. There have been several upgrades and downgrades on the stock just in the past couple of weeks and it rings the bell of what I have been telling you….no one knows what the stock will do in after-hours or on Friday until the event is actually here.
Amazon reports after the bell and there are as many opinions on the stock as the day is long. But the analysts with opinions don’t have a profitable trade with the May 90 calls (ZQNER, $2.25, up $0.55) which many of you got into at at $1.50 or less. The calls have hit a high of $2.40 this morning and now is the time to close at least half the position if not 3/4’s of it.
Yes, there is are some who say this thing flies to $90 and it very well could. But you are at the market’s mercy if you leave the entire position open.
When most people trade earnings, they actually trade the earnings announcement and buy the day before and sell the day after. There is nothing wrong this one, heck, I’ve done it but I don’t do it all of the time. Instead, I pick my spots and I try to stay ahead of the crowd.
I would love to see Amazon fly to $90 but I would like to see you make money in case it doesn’t.
Rick Rouse
Rick@OptionsMentoring.com
