An Options Strategy That Can Return 100% Overnight

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Traders like to be in and out of the market quickly with high returns, naturally. There is an options strategy known as the earnings iron butterfly which provides the opportunity for just that. In this video we cover the details of the earnings iron butterfly as a possible addition to your trading arsenal for a small amount of your overall trading capital.
#ironbutterfly #stockmarket #optionstrading
SMB Disclosures www.smbtraining.com/blog/smb-...

[@kurts9115]

I appreciate how up front you are with the downsides of each strategy. Most gurus sugar coat the negative side. There is no free money in the markets. The best you can do is use strategies that have the probabilities on your side and practice prudent trade and money management. Rinse and repeat.

[@wmstaceybutts8385]

I’ve listened to this five times or more . I’m looking forward to this earnings season where I can practice the iron butterfly

[@michaelberico7141]

I actually wrote down everything he said in the entire video to use as a learning aid!. He always packs so much info into his videos and this one is no exception! Great video!

[@banzai.renaissance]

Just executed this on DIS, before the closing bell and earnings today, a bit risk on. Came to watch your videos again to calm my nerves and remember the exit strategy. Cannot tell you how much I appreciate your clarity, depth, and transparency discussing strategies. Long Seth.

[@nealhere]

I like your no-nonsense approach to this. Your presentation is much more legitimate than many of the hypsters that are presenting similar information. I liked it so much that I am enrolled in your training and growing in leaps and bounds. Thanks for all your help all the best Neal m

[@smbcapital]

Thanks for the kind words Neal! glad you are joining us!

[@ThrashWarlock]

Thank you Seth. You mentioned in a previous comment about potentially doing a video discussing tools used to find good earnings candidates prior. I would love to see this. Amazing video as always. Keep them coming my friend.

[@avieda]

thank you for the interesting idea. on ~5:20 you say ...which happened to expire the next day.. is this a must have condition to this play ?

[@bmoraga01]

Seth, this was excellent. Well explained AND illustrated. Very helpful and much appreciated.

[@sethfreudberg4750]

Thanks Bmorago01. Please let us know what other topics you'd like me to cover.

[@bmoraga01]

You are welcome, Seth. I would like to see information on market makers and price manipulations. Aside from a couple of books by Richard Ney back in the early 1970's on the role of stock exchange specialists, there is painfully little information available today. Thanks!

[@wmstaceybutts8385]

bmoraga01 I watch the market makers when I trade weekly $spx.x. 5k-13k contracts define market makers. They seem to be profitable 👍 I’d love to know Seth’s thoughts

[@emmanuelowusu7528]

Thanks for the video. Please at 11:44 of the video you mentioned that there are tools that can be used to check if the current expected move after earnings is higher the the historical move. Can you please share an examples of such tools ?

[@rajeshmalhotra2084]

so can we buy the atm straddle for the weekly call post day of earnings three weeks before when its cheap and take it through earnings will that work the play into earnings may also come in the picture here with the volatility rising then falling post earnings so then we have two choices to take it off before earnings day or after earnings day e.g. stock AB has earnings on fib 17 after close so we can buy the staddle in the first week of Jan with the fib 19 expiration atm at that time yes but nevertheless. this is a thought kindly advise is there any merit here and if there is not why. either way I shall learn

[@aGr3atD4y]

great vid!

[@mater531]

Seth, you never explained how you determine the size of the wings.....can you post? From example it looks like you bought the 30 delta wings....thank you for sharing these strategies.

[@lesliethompson8846]

I like Seth's presentations. He's straight up with the good and bad of each strategy.

[@d4munche3z]

Is it safe to assume that I may have to factor in the cost of not being able to sell the long put? How would I know if the options are at a high enough premium? Do I just look at IV or is there a way to see historic prices for the option? Would this still work in a relatively low VIX environment, like we are in now? Is this still profitable if it doesn't land on one of our long calls or puts...or relatively close?

[@sethfreudberg4750]

Chong, I may do a follow up video on how to identify candidates for this strategy. I will try to answer your other questions in that video.

[@d4munche3z]

@@sethfreudberg4750 Thank you! I appreciate the feedback and your efforts to engage!

[@brandon183]

Very under-rated options strategy; collect money from the gamblers. This and directional credit spreads are all that I trade.

[@sethfreudberg4750]

Thanks, Brandon B. Please let me know what other topics you'd like me to cover.

[@brycehughes4586]

directional credit spread?

[@TraderDT]

same here bro. :)

[@vishka07]

100% or more!! Is all as about volatility, it doesn't need to be on earnings reports, and mostly you don't need 24 hours, with a good volume you can make it in around 10 to 20 minutes, sometimes even more than 100% is rear to get 1000% but is possible(but i think my style is riskier with a good money management everything is possible, but 10k to make 900, with that amount it wont be better swing trading on a stock that is in tendency? Can make even more with less complexity? Good info and great videos 👍

[@Expprods]

vishka07 I kind of agree with your assessment. There is lot of complexity and if you don’t pay attention you can be upside down, another concern I have is volatility and partial fills. Not sure but you can get screwed here.

[@josuereyes8223]

hi guys, the best success that i've ever had was by following the Trevs Exchange Tactics (just google it) without a doubt the most helpful resource I've tried tried.

[@grasshopperfiddler]

Hello! Thanks for the video, question: Why does the put option price go from 1.90 for $1745 put to $.58 for the $1740 and then back up to $.93 for the $1735 ? This dosent make sense, it should be between $1.90 and $.93 All of the prices for puts skip around, why is that?

[@insurancecasino5790]

I have created a custom order called a ghost straddle. You would still need to understand technical analysis on smaller time frames first. But a ghost straddle does not risk both legs of a straddle at first, and never risks the entire value of either option. The risk of the whole trade is 1/1, but if a move is explosive it would easily be much more reward over risk. It works best on earnings also.

[@avinandwani1540]

Can you please briefly explain what legs you enter and how?

[@insurancecasino5790]

@@avinandwani1540 You place them wider, by what you think the stock will move or moved in the past. Instead of risking one whole option, you are risking a certain amount between both options. Pictures are much better: ton.twitter.com/i/ton/data/dm/1186953890274525189/1186953874822709248/dl30yVmJ.jpg

[@richardscott1253]

What is the reason for not selling each end of the straddle "in the money" for more credit since you'll have to cover one anyway?

[@caseytailfly]

The additional credit you get from that is all intrinsic value, which is directly offsetting between the put and call. The intrinsic value does not decay and will change in opposition for each short option as the stock moves. You will always have to pay back all of the intrinsic value you received when you close the position, thus it does not benefit you. You could sell a single side (just the put or call) ITM which will made the trade much more directional. If the stock moves away from your options, then you could profit from the drop in intrinsic value. However the assignment risk is much higher.

[@Expprods]

Seth if you do your DD and find the ideal situation where you buy call in money SP may be day before earnings come out and close out before the earnings release. I am not saying you can do this every company but there are some gems out there, I have been pretty successful. What strategy can I use to increase my success rate ? I know iron condor is a minimal risk/reward but is there another strategy?

[@InfiniteQuest86]

I'm doing this in AMZN on the next earnings!

[@cryptogranny]

thank you love these live strategies

[@juanageitos4923]

I love Seth’s videos since he explains so well with such good examples and enthusiasm! I would love to see a video of holding a short or long strangle until the day of earnings

[@kv5862]

Nice one!

[@paozdr]

Do you have any recommendations on where to check the market's estimates on stock price movements?

[@someoneelse6934]

Yes but they don’t want to tell you.

[@gregfrey8256]

Does this strategy only work if the earnings date and the expiration date are the same? Or, a more general question - what is the relationship between the earnings date and the expiration date?

[@TraderDT]

Ideally, one would use weeklies (earnings release during that series) for these plays to max out returns & volatility crush. Best to put on the earnings trade right b4 the release. For example if it's 'after market close - put trade on within 30minutes b4 session close. If release is 'before market opens' - put trade on the day b4, right b4 closing.

[@joebaby555]

Thank you for this insightful strategy.. I am thrilled to have found SMB . I hope you and your team had a relaxing day off on July 4th.🇺🇸

[@sethfreudberg4750]

Thanks, Joseph. Let us know what other topics you'd like us to cover.

[@joebaby555]

Hi Seth , I really enjoy and learn from your option plays up to earnings, how about other strategies that you or the firm uses.. Your explanations seem to resonate and stick with me ..with the help of notes... I sim trade 30 to forty puts and calls a day and seem to be leveling out...I do this to understand the mechanics of scaling in and out and watching the movement of the underlying asset and how it is affecting my options...Thanks again for your generous guidance as I learn my passion of trading.

[@royreyes8422]

this is like the mona lisa a work of art. thank you for sharing. one word that drives folks nuts #mystery

[@cottondai]

Wow thank you for sharing this lesson. I will apply it right away.

[@Immense1121]

cottondai did you apply it, and if so how’d it go?

[@user-zq1lb3lx4m]

@@Immense1121 it went so well that he no longer responds to peons like us...

[@calabaza1702]

I like it but is there particular stocks that are good for this at earnings? large caps or tech stocks?

[@sethfreudberg4750]

Calabaza, there are tools for determining this. I may do a video to go over the use of these tools. I'm trying to organize that now.

[@TraderDT]

Most S&P and Nasdaq stocks that are highly liquid and optionable.

[@michaelberico7141]

Isn't a key part of this strategy the fact that you need to put it in place 15 minutes before the close, the day before earnings are announced, with the next day being the last day of trading? So that means you have to find stocks that report after the market closes on Thursday or before the market opens on Friday, being that most otions expire Fridays. Isn't that correct?

[@dek2000utube]

How would you have manage the trade if it had gone against you in terms of where you would have put your stop loss?

[@caseytailfly]

These spread trades are defined risk. You should be comfortable with the max loss when you open the trade. There are management strategies though such as closing the tested side that’s ITM and rolling the untested side out in time and/or closer to the money. Sometimes just waiting it out can work. The stock may make a huge move at open only to drift back toward the short strikes during the day. Turning an initial loss into a scratch, or even a small profit by the close.

[@rsa108ify]

I traded PUT SPY calendar, (bought one Aug 280 PUT for $300 and Sold July 280 PUT for $150). Spy went up away from my 280 strike, but am down $80 so far.The later date option, lost so much value, that even the shorter PUT option expires worthless, I still lose money. Not sure how calendar would be profitable. I have watched your video on that actually. Thanks.

[@Deeeve]

A calendar spread is most profitable when the stock is around the strike. It also helps when IV increases. But the strike is the most important thing

[@sethfreudberg4750]

Calendars can be profitable in lots of different circumstances rsa. Perhaps I can do a video explaining this.

[@rsa108ify]

@@sethfreudberg4750 Thanks. That would be great. What Delta to buy and sell etc...

[@orkayen]

Thanks for the video. I have been doing IF for ER since last week. This week, I traded AZO with an expected move of 4.8% ($76 move) ATM 1580 and wings were 1630 and 1530. So, 50 wide and 3,880 credit. After ER, it opened @1616, high 1660 and closed 1643. Overnight, I lost 1,220. Next day, it went up to 1704. Can you tell me what went wrong here? Did I select the wings wrongly,(Instead of 76 wide , I went for 50 wide) ?

[@davelawson2564]

you took the risk and it rallied more than you expected . you probably did not study previous Earning spikes

[@orkayen]

@@davelawson2564 That was my question. Even If had studied and say 75 was average of previous spikes, do we go for 75 wide spread ? that would increase my credit as well as risk. Correct? Is that typical approach instead of implied move?

[@davelawson2564]

@@orkayen if you want to play it safe then it will be 85 points above SP. spread can be smaller

[@orkayen]

@@davelawson2564 thanks. what is SP? sold strike(price)?

[@pcbondart]

Question, do yoou ever work with simple directional trades, where either a call or a put is purchased?

[@pollito5452]

Id say he rarely does. Professionals do strategies and go for winning trades. Noobs buy calls and puts to get rich and lose all their money in months. I have done that as well.

[@fredeicher4378]

Selling options is where the money is made.

[@pcbondart]

@@fredeicher4378 thank you,

[@barski8885]

If you want a 120 pt wide butterfly, couldn't you buy the long call and long put a week or so earlier and buy them much cheaper, then sell the ATM straddle just before ER? The stock may move in the meantime, but you might be able to roll one wing or both in for a net credit, couldn't you? Is part of this strategy having expiration ASAP after ER?

[@barski8885]

Also, maybe buy a narrower long strangle to start with, then roll one or both sides out to the width you want and then sell the straddle just before ER.

[@andyatmosphere]

Have no clue what he said but damn I’m intrigued!! Just another tool to my investment strategy.

[@MD-nt9nv]

How do you determine where to place the wings?

[@charlierobles316]

That's up to you

[@MD-nt9nv]

@@bepositive99 Thank you.

[@mrt6251]

I have not checked but are these premiums on these strike prices cheaper a few weeks ahead of time?

[@stevehebert2189]

They would be - but you don't want cheaper premiums on the strikes you are selling. The money is made on premium decay (or premium collapse in this case)

[@zb3276]

great video. the 60 point wing is about 3% of the stock price. why you choose 60 point as the range of wing? what are the general rules? why the transaction of this trade is so expensive? does the cost of this trade make it less likely to be a winner?

[@sethfreudberg4750]

The 60 point wings were chosen to control capital and risk, ZB. The cost of the trade always will effect the risk reward.

[@moesadr3342]

Great video thanks. Wondering if anyone can tell what could be the best option strategy with the highest profit opportunity and the least amount of the loss in each market if one decides to focus on one or two strategy only?

[@jeanieking1152]

Thanks for the great video!!!

[@markriddle7439]

Hi what is a good platform to do paper trading options on?

[@kurts9115]

Think or swim (TD Ameritrade) is outstanding. You can paper trade forever, but you may need a minimum funded account which you do not need to trade. Check with them for the current rules and policies.

[@leetrader9576]

So why would you buy the atm call and put the week before and see them the day before earnings?

[@TraderDT]

Seth was just illustrating how much the premiums are jacked up over a period of time. Ideally, u buy the ATM calls and puts within 30 minutes b4 the session close if Earnings come out 'after market' hours that same day....OR if they come out the next day - 'before market' opens.

[@petkuscinta9797]

I have not watched the video yet only till 1:55. So this comment is prior to watching and I will see if my statement or view will change. Most option traders that sell cash-covered puts and sale-covered calls would say "Do not trade options (30 days options) if the company financial results date is inside the expiry date. Hearing this video I have a feeling that it is going to capitalize on a strategy that expects the stock to move rather strongly after learnings. I guess it does not matter up or down as long as it does not stay the same. Ok lets finish the video.

[@Crybabehot]

Is short here means sell,long means buy,right?

[@bunty19881]

Yes when you short an option it require huge amount as compared to buying where you can buy option by paying the only premium.

[@Immense1121]

If anyone can answer why it would only be 720 at stake not like 2500 please explain? Thanks.

[@haichenzhang1570]

margin req'd on opening the trade is (1800-1740)*100-5278=$722 for both credit sprd

[@mikebuck3252]

i listen to this before i go to sleep

[@cloudyjohnny]

So if I take a call and predict by December 20th I have to hold the 100 stocks? Until the 20th

[@benny748]

Cloudy Johnny nah u can sell it anytime

[@kauaicr1431]

Looking at the implied volatility & expected move are critical to this strategy.. and not mentioned at all? If IV was expecting 4-5% move you wouldn't want to make this trade..

[@Deeeve]

yeah IV is important. I think that he needs to explain the more nuanced stuff about options besides just the strike and the delta

[@siddharthg4623]

Generally IV are high just before results. Generally high percentile

[@sethfreudberg4750]

Ryan, I didn't use the words implied volatility, but that is was in fact discussing the entire video, because the focus on the at the straddle effectively describes the market's implied volatility. A 4-5% move is not at all necessarily a reason not to do this trade. You need more facts to make such a decision.

[@siddharthg4623]

Also did Not mention which strike Wings to buy ?? As it depends on expected move

[@siddharthg4623]

But I appreciate the video, Thanks @SMB

[@joel-udehhugo4633]

An educative and a very informative video.👍

[@sethfreudberg4750]

Thank you Joel. Please let us know what other topics you'd like us to cover.

[@biztelegraph5934]

SMB Capital: we don’t sell anything to you, but you should buy from us.

[@ashleyreeves8188]

Scalping platform in uk? These are rare to find🧐

[@hussainamani7636]

I have been trading with Saxo Trader, they are good but expensive, you can try Tasty Works. They are much cheaper than Saxo.

[@sethfreudberg4750]

Not sure what you mean Ashley.

[@miketmentor3338]

Wouldn’t this strategy work in this market where things gap at open a lot? Sell it at close, and then wait for the gap in the morning. And what about on a triple leveraged ETF? These move a lot anyway. I think I’ll paper trade it

[@0628452]

I deployed this strategy on 4 earnings; HD, MDT, NVDA and TGT 2/4 success rate. HD and TGT blew past the wings. I selected the wings with the expected move in mind. Can you make a video on making adjustment(s) to the iron butterfly if it goes against the trade?

[@ronsexton3685]

You should do a video on what could have been made when Tesla options went to $10,000 .

[@smbcapital]

Will talk to seth about this today and maybe we can get something out. If we do check Instagram bc it will likely go there

[@ronsexton3685]

@@smbcapital I haven't done instagram. Maybe i should...

[@astriverofstrengthandknowledge]

Reverse iron condors are where its at on earnings stocks.

[@seanstockton3031]

Do you all have a chatroom or something that will show live trading

[@ConstantinUngureanu]

This is GOLD big THANK YOU!

[@sethfreudberg4750]

You are welcome Constantin--please let us know what other topics would be of interest to you

[@ConstantinUngureanu]

@@sethfreudberg4750 OTM cheap calls and puts how can they be used and with what strategy to build up a small options account thanks

[@danielkillam9843]

is our maximum loss potential on this trade $722?

[@danielkillam9843]

And what percentage of the time are we going to profit on this type of trade?

[@purelife9000]

Knowing that the market maker is going to pump up the premiums why not go long the ATM options a day or two before she does that and sell them both just BEFORE the earnings announcement? This maximizes profit on both sides and you don't have to care what the earnings come out at.

[@figh761]

But if everyone doing this strategy, what will happen 🤔.How it can end as loss and how to face that via adjustment

[@Ryan-sl8mw]

everyone isnt doing this though

[@15chris45chris]

How would you trade a small $100-200 account. Assuming each month, you add another $100-200 to keep growing and help bring the account back to positive if you blow it a few times. So consistently profitable trades with a very small account

[@johncalvo1743]

Well with only $200 in your account, you probably won't be able to SELL options. The margin required would be much more in case of assignment. My advice to you is to have at least $2000 so you can open up a margin account. My BEST advice is that if you only have $200, you shouldn't be trading options to begin with, not because you can't make money, but because your knowledge/experience is probably just as limited.

[@rickbate2164]

PERFECT

[@austinmiller6837]

What is the max loss on this trade?

[@chukaz123]

$722

[@konikacariapa3289]

One could do a short strangle and benefit from the volatility crush post earnings

[@sethfreudberg4750]

Konika, that would be a variation on this basic theme, with less risk and less reward.

[@konikacariapa3289]

Thank you for taking the time to reply. -I will simulate this strategy since earnings season is upon us and adjust the wings differently and see how that works out with different strike prices. Thank you again

[@bharathreddyweb]

This can be applied on index options?

[@TraderDT]

True - but a short strangle is expensive AF (more margin required) with 'undefined' risk. Defined risk strategies like Iron Flys or Iron Condors are the way to go - IMO.

[@johncalvo1743]

"Bulls get fat. Bears get fat. Sheep get sheared."

[@hochiminhcity443]

Well explained but better explained with 5% talking head hand gestures 95% graphics ie calculations charts etc.

[@vrthati]

🎉

[@TheSliceBlade]

Wouldn't the margin required for a play like this be so incredibly high that your returns would be a lot less than 100%?

[@FLechdrop]

Could you explain how the $722 risk was arrived at? From the example, it almost seems you can't lose.

[@riyer2010]

atm call price + atm put price - hedge call price - hedge put price = 52.78 CR; 60 point width; 60 - 52.78 = 7.22; 7.22*100 is $722

[@FLechdrop]

@@riyer2010 Yes, I figured it out eventually! But thanks!

[@TraderDT]

Piet Hein: 60 point wings x 100 = 6000 minus 5278 credit received = $722 margin. U lose if the stock moves up/down MORE than 60 points - beyond the 1680put or 1800 call wings. But as long as the stock stays within that range - u got a winner on your hands.

[@lawrenceospina4779]

There should be a warning label on these videos 90% of day traders dont make money.

[@biggreek4484]

A much better strategy is just a plain old straddle.. leave the wings out. That way if the price moves in either direction you stand to make profits and collect the premium left from the other side. So if we play an ER with the stock being at $100 and i buy the ATM call for 5 and ATM put for 4.5 and the stock rockets to 120, my ITM call will rise to lets say 25.50 and ATM put will drop to .50, making me a profit of about 2 grand or more on this play as one of my options moved sufficiently enough to cover my losses and make me profit on the trade.

[@orkayen]

The expected move was 9.5. There is a remote chance of this stock (in your example) going to 120. Very rarely we see such moves. So, in most cases, the stock moves less than the straddle price plus IV crash create a loss for you.

[@BryonLape]

I've heard Seth explain this numerous times and I still have no idea how to do it.

[@vitalsign0]

For $100 I'll show you how to do it on a Webex video meeting. I can walk you through it.

[@insurancecasino5790]

If you want the stock to stay in a range, you sell those as strikes with calls and puts. you buy cheaper options that will have higher strikes for protection. All options strategies are just spreads unless you are just buying options or selling them naked "no protection". The names are confusing. But most multileg options are just combos of spreads. Do you understand a spread or selling an option naked? Once you get the spread down, you can understand all the strategies. Study those spreads. A straddle is just buying a call and a put, hoping the stock moves enough to move the call or put to move enough in price to cover the cost of the other option. Say you buy a put and a call for 1 dollar each. you want one of them to move more than 1 dollar to make a profit. Say you are betting on roulette both black and red at the same time. You would need two reds or blacks in a row to make a profit. That would be a straddle.

[@huntstoddard9322]

Here's my attempt to put it in a nutshell. Note, my knowledge is theoretical, as I've never actually traded this. Right before earnings, at the money (ATM) calls and puts are inflated because otherwise everyone would just buy both and when the stock moves massively, make a fortune either way it goes. Can't have that. Now, here's where my knowledge gets murky. Are the ATM option premiums inflated in value because a market maker has his finger on the dial, or are they just set that way because the implied volatility of other options makes the black/scholes function turn out that way? I'm not sure exactly how this works, but regardless, the premiums are way boosted right before earnings, not just ATM but everywhere. The iron butterfly is a iron condor with both short options ATM. This maximizes the premium that you sell. In this case, it's around $5300. The loss on an iron condor (or butterfly) is determined by the width of the wings. When the stock goes above the upper (call) short option, you start losing. And if the stock goes below the lower (put) short option, you start losing too. You keep losing until you hit either of your protective long options. In this case the wings are $60 (points) wide. That means the loss is 60 x 100 or $6000. BUT, you already made 5300 premium so your max loss is $700. You BEGIN with a profit of 5300, so on a profit/loss chart, this will be a pyramid rising above the x axis to 5300 and extending downward on both sides. The reason this can actually work here is that the premium that you've sold is so high, you can afford to have super wide wings. If you didn't make so much premium, you'd be setting yourself up for a multi-thousand dollar loss (per contract) if the trade went bad (ouch). The key elements to profiting is that the stock doesn't move up or down enough to the breakeven point. That will happen if the market overestimated the value of the ATM options. You also need to have a stock that historically has an elevated IV (implied volatility) before earnings. You also need a stock that will have a volatility crunch (sharp reduction) right after earnings so that you can buy back your iron butterfly at a low enough price to make a good profit. There are a lot of "ifs" but apparently it can be done.

[@bmwman5]

vitalsign0 I’ll do the same for $90 😉😸

[@lombardo141]

Honestly you have to learn how to trade stocks first. The more screen time you have the easier it will make more sense

[@lombardo141]

Hmmm, not for me. There is edge there but not mine. Thanks for sharing anyways.

[@anthonymiller7992]

2:45 starts the $4,000 advertisement hahaha, time to finish watching the video and see if this is like most others, nothing more than a great infomercial. LOL

[@fintomalto3459]

I'm not understanding how $722 capital invested and $974 returned equals 130% profit. You gained $252 on $722 invested per butterfly, wouldn't that be 35% profit? Still an awesome return, but you're not more than doubling your money.

[@sergeisavitski7339]

It's a credit butterfly, so you receive money when you open the trade. So your cost to open the trade is $0, but your broker will require you to have $722 in your account available in case the trade goes wrong. The guy is saying that he technically invested $0 to get $722 and then some. I see your point, though.

[@brycehughes4586]

@@sergeisavitski7339 so can you lose more than the $722?

[@sergeisavitski7339]

@@brycehughes4586 No. That's the max loss. You take the bigger width of the strikes (in this case, it was $60 on both call and put sides, so 60 is the width. You could have 30 on calls, and 60 on puts, so you take the 60 because it's bigger), multiply it by 100, and then subtract your entry price. In this video, you'd have $60x100=$6000, then $6000-$5278=$722. This $722 max loss is also capital requirement/cash you need to have in your account.

[@PeterJames143]

He didn't spend 722 the broker held the 722 just in case. So the 722 was at risk but not spent. Traders like to make ratios showing the amount they potentially could have lost against their actual profits or possible profits. The theory is that if you calculate a healthy risk reward then you can take the bet again and again even if you lose it was a good bet. Risk reward ratio.

[@TraderDT]

Finto Malto: When u buy back (or close out) the trade, your NET Profit is $974 / $722 margin/capital = 134% ROI. I would admit Seth could have been a bit more thorough in his explanation - e.g...how he calculated the $722 margin. Simple explanation, his wings were 60pts wide x 100 = 6000 minus 5278 credit = $722.

[@TraderPulse]

Wait. How are the options prices so cheap at the beginning then sky rocket 15 minutes at market close? The stock would have to go flat on the day of earnings. I compared this to SPCE option pricing (Feb 25) before earnings and the call went down in value whereas the put went up in value making this strategy not work.

[@Chuck1262]

In a gadda da vida

[@jamesbrown5769]

Baby

[@kevindecker4161]

Seems a lot of commenters here need to paper trade first to figure out how this works.

[@ronsexton3685]

Tried this with Google. Market seems simply too volatile for this strategy right now. Google didn't work out. Of course i still have a day or so to expiration. But so far not looking good. GOOGL: Trade date 28 Apr 20 - Earnings 4/28 20 after market 1 May 20 1195 PUT 1 May 20 1255 PUT 1 May 20 1255 CALL 1 May 20 1325 CALL It shot up over 100 points after hours! I don't think i will try this on any others right now. Too crazy. Currently GOOGL is at 1343 on 29 APR 20 .

[@imaginesagi]

*JR Smith confused look*

[@elkuartostudio]

So, this is gambling basically!

[@fastone136]

right its close.but your the casino .trying to set the odds in your favor.

[@TraderDT]

Not exactly for an Earnings Play. For example, Seth was expecting a 60pt "expected move' (+ or - ) range with the stock after earnings. That is a 1 std deviation move which is accurate 68% of the time .Hence, this is better than a 50/50 bet. So his Iron Fly play was profitable becuz the stock stayed within that 60pt range (+52) after earnings release & volatility crush. If the stock moved greater 60pts (either way beyond the wings), he would have lost most or all of his $722 margin he had to post for that trade. Moral to story - if u know the 'expected move' range of a stock prior to its earnings release & build your Iron Fly or Iron Condor around that - u will have significant edge here; the odds are in your favor. That's what's up! Dope strategy. :)

[@TheAndroid18k]

Sooo much BS like 5minute long.. start straight to the point

[@saikatdg]

This is deceptive. The Strategy took advantage of not only the price move but the same day expiry. If expiry was not there, the strategy could never generate that % of profit only based on Company result. But the vdo claimed that its a strategy for company earnigs only. I dare you to show such result when expiry is at least a week away.

[@saikatdg]

@silverback17 S I don't think so. Listn carefully.. The guy is claiming tht its a strategy for company results. Moreover, how many times u come across a stock where expiry is just next day after result?? Remember that the option of the stock should also be substantially lequid. I wont go for this strategy which may have a chance of application once or twice a year.

[@giffy7962]

@@saikatdg That is literally the point. They're trading on earnings where movement/volatility is crazy. There's 4 earnings period per year you can do this on. I just don't think you understand what's going on here thats all.

[@saikatdg]

@@giffy7962 i think u didn’t realise what i am emphasizing. I wanted to say that company result has a direct impact on price movement i. e delta in options term. And expiry has same impact on time decay i.e theta. Nearer the expiry more theta decay. This strategy is on result, i. e price movement. But bcoz of nxt day expiry, it also got the advantage of huge theta decay. So eventually we got such huge % of profit where both delta and theta involved. But such situation where result day is just day before expiry is a reare phenomenon. So based on only delta movement bcause of result, such % of profit in a day is highly unlikly. And yes i do know tht result is out 4 times a year but how many of them get expiry on nxt day, is my doubt. I didn’t doubted the strategy, my question is the claim of such % of profit without nxt day expiry.

[@fbexpunge]

No he's right, you don't understand what's going on here. The point is to close the trade the next day. You don't really care about anything other than collecting volatility premium on the trade. The options are overpriced because there is uncertainty in how the price will move because no one knows what the earnings results are. Once earnings are reported and known, uncertainty (and volatility) plummet and cause the price of the option to go down. It doesn't matter much if you do this on a Monday or a Friday (though you do get a little bit more time premium from faster theta decay on the the Friday trade) because you're buying the spread back for less than what you paid the next morning which is how you get a profit. If you want to extract every penny out of this play, you can use an iron condor instead of a butterfly and let it expire worthless if you place your strikes out far enough. For more information, check out "Implied volatility crush"

[@Takkaho]

@@fbexpunge there are people who focus on how it will work and there are people who focus on how it won't work.

[@NotShivekArora]

Skip this. Just a simple straddle. Too much BS till 5 mins.

[@lydiayuna9155]

click-bait title, nothing guarantees you 100 return overnight, the only thing guaranteed is your risk. Please be careful and be responsible in option trading.

[@dennisw8026]

Lots of strategies "can" return 100 percent overnight, but will they actually? LOL

[@michaelkay8803]

The worst strategy ever!!! The straddle is pumped up at money and out the money!!!! I’ll take the opposite side of this trade!!! This guy is market maker he will be selling overpriced option!!! Show me some real trades!!!