Way back on December 10th Dan checked in on gamemaker Electronic Arts (EA) and detailed a trade that sold some premium in the near term to finance calls to play for move higher into and out of earnings, which weren’t until February. Here was the original trade, from Dec 10th:
EA ($83.30) Buy Dec 28th weekly / Feb 90 call calendar for $3
-Sell to open 1 Dec 28th weekly 90 call at $1
-Buy to open 1 Feb 90 call for $4
A month later, on January 10th, I updated the trade. At the time it was a nice profit, the Dec 28th short call had expired worthless and the Feb 90 call was worth 5.40, versus the original net cost of 3.00. Exactly how you want a calendar to behave. In that Jan 10th post I went over a couple options to extend that position, with an eye towards earnings, on Feb 5th. All three options would have made really nice profits. But at the time I particularly liked the idea of rolling the short strike higher to the expiration right before earnings:
And a third roll option is to roll but continue the calendar positioning. Earnings are expected for 2/5 so the 2/1 expiration is one to look at and in that case the 95 strike is about at the expected move for 2/1.
Right now those Feb-1st 95 calls are about 1.50 which would reduce cost to just 1.50 overall and allow for ANOTHER roll into the event, should the stock be at or below 95 on Feb 1st. I really like that option.
The stock settled in around 90 and those Feb1st 95 calls expired worthless, leaving a long Feb15th long call into the event at just 1.50 total cost. The stock actually got hit pretty hard on earnings, but since then has had a monster rally, largely in part of the popularity of Apex Legends.
With the stock now 102.25, the Feb 90 call is worth about $12, versus the initial $3 at risk, and the subsequent 1.50 at risk after the roll. That’s a nice gain on something that was able to be only 1.50 at risk into the event. The Feb call expires on Friday and of course can be sold now to realize those profits.
If you’re comparing the other rolls mentioned, the roll to the 90/100 call spread would have made 8.65, the roll to the 90/95 call spread would have made 5.10, versus the calendar roll detailed here which made 10.50.