Today I used an easy option trading strategy to trade around an earnings report. Yesterday, Salesforce.com, (ticker CRM) reported earnings. Typically, there is a lot of volatility before earnings, and sometimes there is still elevated volatility afterward.
Salesforce.com Earnings Report
The earnings reported were 61 cents per share, which were significantly higher than earning reported 1 year ago of 39 cents per share.
Salesforce.com reported an increase of revenues of $3.39 billion, an increase of 26% year over year. When the market opened, the stock popped up to a little over $139 a share and started to drift downward as traders tried to absorb the results.
Options Strategies – Iron Condor
One of my favorite options strategies that I use to make money is called an Iron Condor. You can see what it looks like below. It is basically a short put spread and a short call spread combined.
I sold the 115 / 120 put spread and the 150 / 155 call spread for January 18th, 2019 expiration, which is 51 days away. I collected $154 as my premium.
Best case scenario would be for CRM to stay above 120, and below 150. If so, I would get to keep all of my premium. But honestly, I plan to buy this iron condor back, for half of what I sold it for.
Here is another way to look at this trade. You can see that I sold the 120 puts and the 150 calls in red, and bought the 115 puts and the 155 calls which are in green.
I like iron condors because they allow me to limit my risk while taking advantage of time decay. The iron condor is one of the best options strategies for beginners who want to take a non directional position on an underlying stock.