Did I predict that the share price were going to fall? Well, definitely not.
It is earning seasons again, where we would expect violent volatility in share prices.
Two classic examples was these:
Before the share price tanked, both of my options trades were already closed.
META Trade - Click to enlarge image
In the above trade, you can see that on 21 Oct 22, I sold a total of 10 vertical spread options with a credit of $650.
On 26 Oct 22, which is one day before earnings, I bought back the 10 options with $320.
Net net, I made $330 in 5 days. The next day, META fell by a whooping 20%.
In the above trade, I sold 2 AMZN vertical spreads and collected $140 on 13 Oct 22.
On 27 Oct 22, I bought back the 2 AMZN options at $52. In effect, I collected a total of $88 in a total of 14 days. On 28 Oct 22, AMZN fell by a whooping 10%.
Why Did I Close These Trades?
Well, the answer to that question is earnings.
I did not know how the stock is going to reach on earnings day, and since I already have considerable profit from my vertical options - I might as well take my profits off the table first.
Note that I had absolutely no idea that AMZN and META would have tanked. But what I do know is that we have to manage our winning trades when it comes to options trading.
After all, you cannot lose money by taking a profit.
Of course, the stock could have very well gone the other way, and I could have closed for a bigger profit. But then again, you need to set these decision principles for yourself. For myself, I don't want to take the risk especially through earnings, therefore I took profits first.
The Bottom Line
The goal of using options to massively stack odds towards your favor. Keep your win rate high and limit your losses whenever you do not win. Over time, as you practice this principles, you will start to slowly get the hang of it.
If you like to find out more about options trading for small capital size, you may register your interest in my upcoming options course.