TripAdvisor Stock (TRIP) Returns 46% – Exiting The Trade Ahead Of Earnings Strategy To Lock In Profits – Nov 7 2017

trade-ahead-of-earnings-strategyTripAdvisor was one of the Trade Ahead Of Earnings Strategy on Nov 6. The decision to enter the trade was easy to make based on other traveling websites and their results. Expedia would be a good example as it too plunged after earnings.


Exiting The Trade Ahead Of Earnings Strategy

The TripAdvisor Stock trade was a reverse iron condor. Below is the original trade when entered:

Nov 17 Expiry – reverse iron condor

I bought 5 of the $39 put strike for $2.37 and sold 5 of the $35 put strike for $0.80 = $1.57 X 5 = $785 ($4.00 spread)

I bought 5 of the $39 call strike for $2.35 and sold 5 of the $43 call strike for $0.95 = $1.40 X 5 = $700 ($4.00 spread)

Commission $15.00

Total Capital At Risk = $1500.00

Outcome:

Once the stock fell below $35, the put side of the trade was effectively over. This is because my trade was a debit put spread. The spread was $4.00, so when the stock collapsed and fell past the short put strike at $35, theoretically the trade is over and the maximum amount has been made in the trade.

However rather than the maximum amount being $4.00, the size of the spread, I like to scale out of the trade. Normally I start by buying to close the short put strikes. As I have no way of knowing if the stock will bounce back immediately or continue lower, I like to buy to close the short puts or short calls, in groups of 1 or 2 at a time.

Here are the purchases made on Nov 7 of the short $35 put strike for Nov 17 expiry.

  • I bought to close 2 for $2.50 at 9:46
  • I bought to close 2 for $2.24 at 9:49
  • I bought to close 1 for $3.00 at 10:05
  • Total cost to buy to close the $35 put strike was $1248.00

As I buy to close the short put side of the trade, which in the case of TripAdvisor was the short $35 put strike for Nov 17 expiry, I also begin to scale out of the long put side of the trade. In the case of this trade in TripAdvisor it was the $39 put strike for Nov 17 expiry.

Here are the trades done selling the long $39 put strike for Nov 17 expiry.

  • I sold to close 1 for $6.10 at 9:45
  • I sold to close 1 for $6.60 at 10:57
  • I sold to close 1 for $6.67 at 12:12
  • I sold to close 1 for $7.28 at 12:42
  • I sold to close 1 for $7.91 at 2:07
  • Total capital returned in selling of 5 X $39 put strike = $3456.00

You can see from the times that the short puts were being closed earlier than the long puts.

Summary

The trade ended with a profit of 46.7%. The trade had been setup so that either side of the trade could cover the opposing side. In other words both sides of the trade did not need to succeed for the trade to return a profit.

The call side of this trade is still active as of Nov 7. I have until Nov 17 for the trade to end. Some trades end with both sides returning a profit.

At present I am still holding the call side of this trade but the put size is finished.

What Was Learned

This is the third time trading in TripAdvisor this year and each time I should have considered increasing the size of the trade from 5 put options to 10 put options.


Thank you for not posting these trades to my public Yahoo forum.

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Learning The Trade Ahead Of Earnings Strategy

For investors learning the Trade Ahead Of Earnings Strategy, one of the best ways to learn is through actual trades, from start to finish.

Here are trade articles that are well worth reading to learn more on the Trade Ahead Of Earnings Strategy including how to setup trades, manage and adjust them and close them for profits. Make sure to paper trade any strategy until there are consistent profits.

Using The Trade Ahead Of Earnings Strategy With Smaller Portfolios: Aug 31 2017

Under Armour Stock: Aug 7 2017 / Strangle

Amazon Stock: July 28 2017 / reverse iron condor

PepsiCo Stock: July 25 2017 / reverse iron condor

Alphabet Stock: July 25 2017 / reverse iron condor

Netflix Stock: July 18 2017 / modified reverse iron condor – full strategy explanation

Netflix Stock: July 17 2017 / handling the modified reverse iron condor

Delta Stock: July 13 2017 / the day after earnings – reverse iron condor

How To Pick Option Strikes May 16 2017

American Airlines Stock Returned 87% – Here’s How – April 27 2017 / reverse iron condor

Alcoa Stock: April 24 2017 – Update of Trade Ahead Of Earnings Strategy After The Close reverse iron condor

Lulu Stock: March 30 2017 – reverse iron condor Handling The Trade Strategy The Day After

Yum Stock: Feb 4 2016: handling a loss when using reverse iron condor trade ahead of earnings

Monster Beverage Stock: May 1 2016: 104% Return – Handling The Trade After Earnings Are Announced

Twitter Stock: May 1 2016: reverse iron condor – calls ended up worthless – 26% returned

Apple Stock: Jan 30 2016: improving on a reverse iron condor trade – 81% return

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Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. You always trade at your own risk. Read the full disclaimer.

Morning Investing Strategy Notes and Trade Ideas and Updates for Nov 8 2017
Trade Ahead Of Earnings Strategy Portfolio Summary for 2017