In our Elite chat room, where we go over real time option activity and trade ideas, I posted a trade in Fed Ex (FDX). With earnings before the open Thursday morning, implied volatility going into this event was elevated giving advanced option traders different opportunities to make money using advanced option strategies. Looking at the option activity going into earnings, I saw a mixed reaction with some looking for prices to hit new 52 week highs, while others where buying puts for possible protection on the recent run higher.

One of my favorite trades going into earnings, is using a calendar spread. A calendar spread involves selling the a closer month contract and buying a further one at the same strike. This strategy is also called a time spread.

The reason I like to do this trade is to capture the "pump" in implied volatility, which I sell and then use those proceeds to reduce my cost of the further month contract that I purchase.  

In Fed Ex, the trade that I posted in our chat room that I was getting into was to, sell to open the March 90 call and then buy to open April 90 call. This trade created a debit or cost of $1.30.

The trade profited at the open even with prices gaping lower after earnings, but I left a lot of money on the table by exiting early and not following one of my basic rules.

In the video I go a little more in depth of the trade and show you what I did wrong and help you learn not to make the same mistake.

Join us in the Elite Chat Room today and let me help you get on the right side of the trade!

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Follow alongside professional  trader Josh Belanger as he follows the footsteps of the smart money traders, while he educates you and points out the trades that have the highest probability of making money.