5 Minute Read

Straddle Trade: GMCR & DECK

March 23, 2015

By | 17 Comments

Coach Matt from Tackle Trading analyzes the vega based trade on GMCR and DECK with the expected volatility increases in both as earnings get closer.

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17 Replies to “Straddle Trade: GMCR & DECK”

  1. Mauricio Uribe says:

    Thanks Matt! Learning new things every day at TT!!!

  2. Sheila Purim says:

    This was really great Matt! I don’t know much about vega trading and this video made it very clear. Seems like a must have in anyone’s portfolio!

  3. Thanks a lot Matt! Wow, vega strategies are very powerful. Very clear and easy to follow explanation!!

  4. Seungkyu Bok says:

    wow this is so easy to understand! Thanx!!!

  5. Mack Grout says:

    This seems so awesome, I cannot but help to think “are these strategies too good to be true?” How can this Vega play go wrong? If I was to place the two trades that you show in the video, how would I lose money? If volatility doesn’t spike and the price remains the same? It seems so unlikely that it seems absurd if every single trader out there wasn’t making all these vega earnings plays…

  6. Thomas Hammonds says:

    This is AWESOME!!! Thanks Matt!!

  7. ken says:

    everyone can make a living straddling DECK!

  8. GMCR was too expensive for me, but DECK, SWI, AKAM and KORS are more affordable choices with very clean IV cycles…. I love this strategy, specially the part that requires little management 🙂

  9. Matt Justice says:

    The straddle is a conservative on this type of setup, while it certainly can lose, if you get some directional movement it will work out. Vega slightly offsets Theta and then Delta can take it further.

  10. ken says:

    hey @matt, about how much of a directional movement makes the trade work out? looking at the risk graph, it seems that even with 0 movement, the expected increase in vega will still make the trade profitable.

  11. Good question Ken, according to the risk graph in order to lose IV would need to drop or stay flat and the price stay still or move very little. These setups have the potential for volatility to increase more than 50% it’s current value to hit the peak of the IV cycle, and even a 20% increase is already profitable 2-3 weaks before earnings…. it really seems that the probability of losing is very small. Are we missing something @matt?

  12. @matt How do you determine what the previous volatility percentage increase was? If volatility increases from .25 to .50 in the implied volatility indicator is that a 100% increase? Please answer on the Coaches Show if you can. Thanks @matt!!

  13. Yes @thammonds3, you are right. Given the way Matt calculated the increase in volatility in the video, that’s how the numbers match. Volatility increased 0.25 points but that represented a 100% relative to its current value.

  14. Thomas Hammonds says:

    Thanks Arturo!!

  15. DaveKaufmann says:

    I placed the same trade as the trade in the video and now at a week from earnings the IV hasn’t increased enough to offset the theta. Wondering if I missed something or if perhaps this time we just didn’t get enough of a volatility spike to make it profitable. Any thoughts? Thanks!

  16. Matt Justice says:

    You are fine on the trade. I am showing a loss as well on both of them so far. Theta has offset vega and we have gotten no delta movement. I am going to record a video tomorrow explaining the trade at this point.

  17. DaveKaufmann says:

    Thanks Matt…Looking forward to it!

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