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$1,928.77 Profit from a NVDA Earnings Option Trade (Butterfly)

We’re going to try to do a quick live session.

Let me know if you enjoy these live events. We’ll see how it comes out and how it works.

In this post, I’ll show you an update on the Tesla trade we did earlier when it comes to options. And then I’ll show you the Nvidia earnings trade example here that it did.

Taking a look at Nvidia

The profits are skyrocketing.

This is a paper trade example. When you’re doing these kinds of trades, start them with paper money. Don’t do these things with real money, especially if you’re new to trading.

I just want to show you this is what happens when you have implied volatility. And it crushes it. Sometimes earnings work out well. I put this trade on a couple of days ago.

You can see right here it exploded. You can’t fake these even in paper accounts. When you look at this, you can see profit and loss per day. It was hanging around doing nothing, and then today, it just explodes.

And the reason for that is because of the earnings. What happens is the implied volatility comes out of those options. And when that happens, this profit picture just explodes and shoots up.

This is where these earnings become powerful. And things like butterflies work well. I know when I first started trading, I didn’t like butterflies. And I had some people when we were doing the Tesla butterfly trade just the other day, saying that they don’t like butterflies because it seems like it’s such an exact price.

Because when you look at the butterfly trade, the setup appears to be like an exact trade that it’s got a real hit. But when you notice and look at the way this trade is set up, the curve right, get rid of that expiration part.

Look at the curve itself. The way the curve is that up is it goes way out past that expiration part. Don’t get too tied in and wrapped up in just that expiration part.

And sometimes what I like to do with coaching students, we just do something like this. The single right here. And you see the curve for itself for what it is.

Rather than just honing in on the expiration. And that’s the way it works. That’s the way it functions because most of the time, you’re not going to handle these trades to expiration.

It’s nice to see the expiration graph. But you’re not going to see them anyways. I’m looking into this as we check back into the Nvidia. If you’re trading these earnings, you can see even this thing now starting to move way more against me.

You want to get out because we’re selling off on NVIDIA would continue. Just from the sheer fact of a couple of minutes here that I’ve been chatting with you guys explaining the trade, you can see it’s already losing some profitability.

And that’s because it’s moving against me and with such a huge curvature. You’ll notice that the gamma is also very high.

And that’s the thing when these trades are close to that expiration that gamma will start to be high, which affects your Delta. Delta is the rate of change for every one dollar move. And the gamma is the rate of change of the Delta.

If you get this thing and just go into your favor, then you take some off. Some people do this. Let’s say I got here three to six contracts. I got a 3, 6, 3 spread. If you want to gamble on it, you could take off 2, take your profits and let one ride for expiration.

Of course, you still have a little bit more in that expiration area. That’s because right now, I’m up about 1840, 1845, 1859. It’s shifting and wiggling around a lot. But you could make an extra $400 in profit.

You could try to let it expire because this thing expires here on the 16th. Today is Friday. So it’s going to expire. I do have a chance, that may work out and happen. But a lot of times I wouldn’t risk it. Sometimes even just getting out of the trade on a Friday is very tough.

Anyways, I’m going to hit right-click, analyze closing trade. I’m going to close it out. I just wanted to do a quick little live session update for you guys to see how this works out.

Let me know if you like it or if you don’t. Then we might not do them as much. Put this trade-in. Let that sit. In the meantime, I’ll go to that Tesla example – a very similar concept.

Take a Look at Tesla

I put this trade on seven days ago.

And this one’s pulling back a little bit. And it’s working. You’d see Tesla here.

It’s maybe down 28 cents. And it hasn’t been doing much or wiggling a ton. When you look at the Tesla trade, the whole point of putting that trade on is that we might get a pretty big pullback.

You see, gapped up and then again skyrocketing – rocketship moving money. People love this kind of stuff.

But realistically, do these things go up forever?

No.

I’m just looking for a small little pullback. If we’ve got one or two red days, the other trade that we put on should become profitable. You can see right here I’ll take these off – the ones that I did earlier.

And this trade we put on was a couple of days ago. It’s only down $30 compared to a potential of $137. It’s still just hanging out doing nothing.

All I’m trying to do is just wait for that one or two red days. And if it just pulls back like a $6-$8 move (plus in a couple of days here with expiration), you’d probably get about a $150 bucks on a $500 investment.

Percentage-wise it’s really good.

Conclusion

I hope you enjoyed this update. Let me know what you think. We’re planning to do a few more things with classes coming up doing some multiweek sessions that will be launching.

I’ll do some more option strategies as well in the membership platform, which is why I’m testing some of this live stuff.

We’ll start digging deeper into some core material like these other strategies and other good stuff.

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