Before Cisco (CSCO) reported earnings, Scott Bauer spotted a major implied volatility gap in the stock’s options between the week it reported earnings, and the following week.
Scott said it was an anomaly that doesn’t come along often.
He released a trade signal that was structured using a diagonal call spread, to leverage the directional move and volatility crush that followed.
Right before CSCO released its quarterly report, Scott made a mid-trade adjustment that reduced his maximum risk to just 55 cents.
When Scott closed the trade, it resulted in a 95-percent gain.
He recorded a video that lays out the whole trade, from entry to final exit.
The analysis, insights, and strategies shared by Prosper Trading Academy’s coaches in Prosper Insider are strictly for educational and informational purposes only. All content reflects the personal opinions of the coaches and should not be construed as specific investment advice or recommendations. Any examples discussed are illustrative in nature and do not represent actual live trade signals or instructions to buy or sell securities. Trading involves risk, and individuals should carefully evaluate their own financial situation before making investment decisions.
Scott covers:
- The implied volatility gap he identified ahead of earnings
- Why he chose a diagonal call spread to structure the trade
- How rolling the position helped reduce his risk to 55 cents
- What he was looking for in the volatility crush to time his exit
- Why his mid-trade adjustment was the difference-maker in the trade
