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Don't Trade Earnings Before You Read This As you may or may not know, earnings season kicked off on April 8, 2014 with Alcoa. Many investors and short term traders love earnings season because the increased volatility... and for them, volatility creates opportunities. You see, before an earnings announcement, option volatility (aka implied volatility) gets jacked up. Now, if you've read The Ugly Truth About Buying Options, you'll recall that the higher the option volatility... the more expensive the option becomes. For many companies, an earnings release causes the stock price to experience above average volatility. Think about it, new information about the performance and future guidance of the stock is about to hit the market. Whether it's good or bad news, it has the potential to shift the opinion of traders and investors. A long term bullish (or bearish) bias can be strengthened or weakened. Of course, prior to the announcement, option volatility increases due to the uncertainty of this binary event (the potential that the stock will have an above average price move higher or lower). In addition, the demand for option premium (mainly from hedgers protecting long term positions and some speculators betting on the future direction of the stock) causes option volatility to spike further. Once the news is out and the information is absorbed, the option volatility gets sucked out of those options (in the form of premium) like a vacuum. Some short term option investors love earnings because they feel the likelihood of options getting mispriced is increased dramatically. Yet, others feel that trading before an event is a crap shoot... and for that reason they stay away. But for now, we'll save that debate for another discussion. What I really want to talk to you about today is the implied move. Have you ever watched someone on Bloomberg or CNBC talk about a stock ahead of its earnings? Saying something along the lines: "The option market is implying the stock will have an 8% move." What does this mean and where did they come up with that number? The implied move is simply what the stock price would need to move (based in % terms) in order for you to break-even if you bought (or sold) an At-The-Money straddle. That's it... nothing more... nothing less. It is not a magic or mystical number; the stock could either overshoot or undershoot the move. The implied move gives us an indication of what kind of impact to expect from this binary event. Now, let's look at an example for further clarification. Now, in order to get the most accurate implied move for the event, we must select the nearest term options. Again, this is not a strategy recommendation; we are simply trying to figure out what the option market is implying for earnings. (With the example below, we are using real pricing. However, the stock or company mentioned below is only hypothetical) With that said, the nearest term contracts are the April 25, 2014 options. The earnings release for NFLXT came out 4 days before that expiration on April 25, 2014. Using the price of the stock of NFLXT 4 days before the earnings event, prices were trading around $345.74 per share that day. Because the stock is trading at $345.74 and there are no $345.74 option strikes, we'll have to select something close to that. Further, we'll select the $345 calls and puts. Why calls and puts? Well, if there is a 50/50 chance the stock price will go up or down, we want to select both options to be "delta-neutral" (not having a directional bias). After all, we are trying to figure out what the implied move is (+/-). The math: The $345 call and the $345 put (straddle) have a mid-price of $39.48. The stock price is $345.74 $345 call mid-price is $20.20 5 days to expiration $345 put mid-price is $19.28 5 days to expiration Side note: Implied moves use the mid-price... however, in the real-world, you are not always able to get filled at the mid-price. Break-even points: $345 minus $39.48= $305.52 downside break-even $345 plus $39.48= $384.48 upside break-even Again, the stock is not trading $345, so we have to do a little bit more math. $345.74 minus $305.52 = $40.22 $40.22 divided by $345.74 = 11.6% how low the stock needs to move for the straddle to break-even $384.48 minus $345.74 = $38.74 $38.74 divided by $345.74 = 11.2% how much the stock needs to move for the straddle to break-even In reality, the implied move has two break-even points. However, to make things simpler we take the two break-even points and average them to get one number. 11.6% + 11.2% = 22.8% 22.8 divided by 2 = 11.4% we took the average of the two break-even points. This entire math could be done quickly with a calculator. In addition, if you use the thinkorswim platform like me, there's a feature called the "Market Maker Move" which gives you a fairly accurate implied move number. They simply take the ATM straddle and multiply it by 1.25. Now, if you don't use thinkorswim, many option trading platforms have graphical PnL analyzers... that display the implied move. Now, based on our closing prices from 4/17/14, the implied earnings move for NFLXT is +/-11.4%. Will it move that much? Is the straddle cheap or expensive? Again, further analysis would need to be conducted to draw an opinion. Also, keep in mind that this implied move includes expiration, not just the event. With that said, it's not completely accurate to say that the implied move for earnings is 11.4%... even though the guys on TV do it all the time. The following day after NFLXT announced their earnings. The stock price closed up $24.41 to $372.96. The price of that same $345 straddle we talked about was at $28.75. That is a difference or (loss) of $10.73. Now, that's what we call a "vol crush" And there you have it, hopefully you have a clearer understanding of what the implied move is and how that figure is derived. In fact, from my experience, I've found that the implied move is often over-priced. With that said, it creates for some incredible risk-reward opportunities using structured option positions. I like structured option positions over buying outright calls (or puts) because of the inevitable volatility "crush." Again, I'll save that discussion for a later date... for now, I just wanted to lay the ground work. As always, I'd love to hear your thoughts in the comments section below. Joshua Belanger is a top expert in utilizing options as a superior wealth creation tool while reducing the risk of loss unlike other traditional investments.

10 Easy Steps to Succeed in Your Online Classes

Congratulations Youve made up our minds to pursue your upper schooling, and doing so online is how to pass if you have an interest in a versatile, studentcentered educating manner. Studying online permits you to pursue different pursuits and attend to different responsibilities whilst nonetheless operating your method towards some extent. However, it will now and again imply that its clean to get distracted. Here are 10 clean steps to verify luck on your online categories.

1. Connect together with your instructors once conceivable. Even in case you are doing smartly within the category, its extraordinarily vital to increase a rapport together with your trainer. When you do that early on, you temporarily understand what the priorities are within the route, what expectancies the professor has of you and youre going to be motivated to prevail, surer of whats forward and higher ready to do smartly with the impending subject material.

Valuable questions to invite your trainer come with the next

How versatile are you with time limits How versatile are you with grownup freshmen What applied sciences do you employ within the route How to be had are you through e mail and different sorts of verbal exchange How do you put up an internet neighborhood and what are the expectancies for participation in it In addition, since instructors are to be had to lend a hand all over the classes, its all the time just right to have had private touch with the trainer early on. This method, when you wish to have lend a hand, its more straightforward to achieve out and get the help you wish to have.

2. Confirm the technical necessities of the route. Online categories can also be very advisable for college kids with busy schedules, however provided that they are able to simply get right of entry to the fabrics. It is vital to obviously perceive what the technical necessities are. So, ahead of the route begins or as quickly thereafter as conceivable, youll want to test that your pc will paintings with the entire online equipment, and that you understand how to navigate them. This will be sure that you dont must spend time all the way through the route attempting to determine the generation.

three. Create a time table and stick with it. Quality online instructors create classes which might be clean to navigate and feature transparent expectancies. Having that roughly easytodealwith framework in position will make learning and succeeding that a lot more straightforward. However, although the framework and necessities of your category arent as transparent, youll create a time table and construction, which is able to very much fortify your probabilities of luck within the route. Using equipment equivalent to Google Calendar is a good way to start out. Knowing how your weeks and months glance and scheduling blocks of analysis time for each and every activity or module will will let you stick with a time table.

four. Ask questionsall the time. When you dont perceive, ask questions. When you do perceive, ask additional questions. Instructors recognize scholars who take part, and if theres a participation or dialogue part a part of the grade, then asking high quality questions is helping guarantee your grade on this space. Even if there isnt a participation part, its all the time helpful to invite inquiries to remember to perceive the fabric and are transparent on what is needed of you.

five. Be arrangedand keep arranged. Students whore taking conventional, campusbased classes most often have a constant time table to observe each and every week, through which study room instruction is adopted through assignments out of doors the category. However, for online classes, scholars will have to search out their very own techniques to stick on most sensible in their paintings. It is crucial that you just be arranged from the start of the semester with the intention to achieve success in an internet route. For instance mark task due dates on your calendar, discover a submitting machine for each online subject material and bodily subject material that is helping you stay monitor of the whole lot simply, and shed light on find out about schedules that duvet sections of the route one by one so youve got an arranged tactic to protecting the semesters subject material as you pass alongside.

6. Have a blank, quiet, and constant workspace. One factor online and inclass classes have in not unusual is that scholars all the time want a spot to review or whole assignments this is blank, quiet, and constant. You can select the place that is for youwhether or not its at a espresso store, a college library, a devoted place of business, or at house. Wherever you select to review and whole assignments, you must make it a constant location that doesnt have out of doors distractions. It is basically key that where is quiet and lets you focal point in your paintings with out distractions.
7. Do no longer procrastinate. Successful distance freshmen hardly procrastinate. They dont do away with assignments or wait till the final second to write down their papers. Successful online scholars experience freedoms that come with operating at their very own tempo and the facility to finish their paintings in as a lot time because it takes them. On the opposite hand, they know that finishing their assignments is best performed early and on time cramming merely doesnt paintings, and it doesnt will let you retain knowledge longterm. Get began early on getting a success.

eight. Work in your studying comprehension. Successful distance freshmen generally tend to have just right studying comprehension abilities. Most conventional, campusbased scholars concentrate to lectures and take notes, and a few online classes additionally require this. However, the vast majority of distance freshmen are anticipated to grasp subject material thru a large amount of studying. Although far finding out classes be offering video recordings and audio clips, maximum systems require scholars to hide and grasp a considerable amount of written knowledge. If it is a problem for you, it could be very useful to first sign up in a studying comprehension route there are lots of assets online that will help you do that. This ability by myself could make a huge distinction on your luck.

nine. Establish and admire routines that be just right for you. If, for instance, youre employed best within the morning or in brief bursts, then set find out about routines that can help you find out about within the prelunch hours when your mind is contemporary. If, then again, you do best through learning at evening or at the weekends when youll devote nightowl hours or longer blocks in your learning, then make it some degree to take action. Consider how and whilst you paintings best, and enforce a find out about plan that respects the routines that be just right for you.

10. Connect together with your friends. Establishing sturdy connections with friends and professors is a very powerful facet of tutorial luck, in addition to skilled development. One of essentially the most rewarding reports in schooling is finding out thru collaboration. Forming significant relationships together with your friends and professors can can help you be told extra, keep motivated, and feature an outlet to specific your personal working out of subject material. So, keep attached thru message forums, chat rooms, e mail, and different digital assets. And take note lots of the other people you meet in faculty shall be conceivable process assets down the road so determine connections and keep in contact

Florida National University gives a wealth of tutorial and professional online classes. Check out the entire choicesyour long run is ready

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