There were a lot of companies announcing earnings last week and only 1 week left for August Option Expiry. As a result, we started to implement an Options Earning strategy based on Ichimoku technical analysis.
On August 7, ESRX Express Scripts Holding was going to announce earnings after the market. Based on technical analysis, the charts were bullish and a pull back had occurred. Therefore, we setup a bullish vertical for August expiration.
The risk graph below shows a $15/contract for a max potential reward of $235 if the stock closes above $67 by option expiry. For every dollar move, we would make $31. The max reward/risk is 1566%. The chances of getting the max/reward was low probability. However, getting 300% reward/risk was high probability. Therefore,our trading plan was to evaluate the profits once the earning was announced.
Here is the risk graph when we placed the trade:
The next day, we exited the trade for $98/contract. This was a 653% profit in 1 day.
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