Dell Straddle Review

Dell opened up a little bit lower than the high of after-hours trading but then climbed back up pretty quickly to gain 10%. Had I sold the Jun 42.5 Straddle around that time it would've netted around 35% profit. Dell has since drifted lower and is now up approx. 6.5%. Currently the Jun 42.5 Straddle would net a 4% profit if I sold. For now, I am holding on to the position, hoping for an upward rally later in the day that I could sell into benefiting from the Delta.

Lesson Learned: Sell Long Straddles quickly
after event-driven Implied Volatility run-up is over due to news release. IV is
staring to drop now and for the Straddle to be worth more we are going to have
to rely on our Deltas. I'll give an update after I do sell the Straddle.

Update - 2:00pm (Central Time):
Well I decided to close out the Dell 42.5 Straddles, here are the results:

I knew that IV's would drop, but I was holding out hoping that the stock would move even more. Next time I play an earnings announcement like this, I will be sure to sell into the open when IV has not yet dropped.

Given that the nearest-month option experienced the largest profit due to the higher level Delta and lower level of Vega, I now know that a nearer-month option is best for these short-term straddles. No matter how you look at it though, 7.8% profit in 2 days ain't bad.

Cheers.