Overnight Becomes Three Days

Hey 5-Star Trader,

“Tuesday Trade” Journal: One of the most important concepts in trading is to review your work, and learn from the good and the bad. Identifying what is working is critical — to do more of it. So, to lead by example, each Tuesday, you’ll get a trade from my trading journal, in which I explain my thought process from start to finish. Trading is all about finding something that works, and applying it over and over again. That’s how you find trading success. So study up on this “Tuesday Trade” and let’s get to work.

For this week’s “Tuesday Trade,” I want to outline my trade in Hershey (HSY).

One of my favorite earnings moves to trade is the overnight move right before a report comes out. So when I saw HSY was reporting soon I started to put together a setup.

On July 28, one day before reporting, I saw that the HSY market maker (MM) move was pricing about 3%. From there, I ran HSY through my Hot Zone Indicator (pictured below) and saw that they normally don’t move more than 3% after their report is released. With that information, I decided to sell four at the money (ATM) iron condors with the goal to buy it back the next day for 20-40% gain ㅡ SELL -4 IRON CONDOR HSY 100 (Weeklys) 30 JUL 21 175/180/175/170 CALL/PUT @3.50 (limit order) LMT.

Pictured below is my options chain. This was a working order, with around a $600 risk, and no stop.

The very next day on July 29, HSY was exactly where I wanted it to be. One hour into the market open, I was ready to exit my trade and take profits ㅡ BUY +4 IRON CONDOR HSY 100 (Weeklys) 30 JUL 21 175/180/175/170 CALL/PUT @2.10 LMT.

But the market had other plans… 

Because this was a working order, even though I wanted out of my trade I had an extremely difficult time getting filled. Despite my best efforts, I could not close my trade and had to hold it until the next day.

Finally, on July 30 I was able to get filled and out of my HSY, but by the time this happened it was too late. In hindsight, I should have worked the order more aggressively. This trade moved quickly and I had to close it for a loss even though my original exit would have made it a nice win.

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