I put on a very bearish option strategy on AMZN yesterday expecting the stock to drop. They reported very bad earnings and missed on EPS, Revenue and they lowered guidance. For some reason they stock just doesn't want to go down and was hanging in there today but now (9:09am Central) the stock is starting to decrease again and is down 3.17. I sold 5 contracts of the 320/325 Call Credit Spread but I also sold 3 contracts of the 295/300 Call Credit Spread. I was expecting at least a $10 move down so lets see if we can get there. I'm currently up $700 on my AMZN strategies.
Also, I noticed that EXPE reported very bad earnings yesterday and that sent PCLN down very big after hours. The stock recovered this morning and when it was at 895 and sold 6 contracts of the 885/880 Put Credit Spread for an average price of 1.05. As long as the stock stays above 885 today I will profit over $600.
Today is going to be a very interesting day.
Jonny
On average, what is your risk reward ratio for the credit spreads that you enter?
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Thanks for your question and I'm sorry for the delay in responding. My average spread will provide me a credit of about 20% so my risk is 80%. However this will vary from situation to situation. Sometimes I do much higher reward to risk but this adds a higher probability of loss. If you are looking for low risk low reward you can put on spreads to bank 5% a week and it normally will work out but once in a while you lose big so you need to have a good strategy to exit the position if the stock goes against you.
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