GOOGL had its earnings announcement last night and settled at a price that gave us almost no move at all. Odd market forces and the lack of an exciting price move gave us a bigger drop in IV than we expected. Our estimates were in the 17.5% IV range and we are down to roughly 15.5% right now. This hurt our position and has us with a moderate loss.
I made a short video explaining how I am dealing with this and what is going on. Hopefully, it helps you understand the trade.
NKE has been in a steady but relatively slow trend up for the last few months. I expect this to continue for the next few weeks, but I am concerned we may have a bit of a pullback.
This trade is designed to make money from the slow progression towards the 56 strike and at the same time limit our losses if NKE suddenly pulls back.
This trade is a portfolio hedge. We are using an Out of the Money VXX Bull Call Spread as a low cost, highly leveraged trade that is specifically designed to offset losses we would take from a large market correction.
GOOGL has its earnings announcement tonight after the close. This event is causing IV to increase significantly on the short term options. After the announcement, the IV should drop back to a more normal level. This gives us a great way to establish a short term high potential trade.