No JOYG in Mudville

Well Traders, a few days ago I mentioned JOYG had made a significant breakout. On that breakout I eased into a small position waiting on the follow-up. On Monday, I sold some March $55 Covered Calls for $2.00/share which I thought was a GREAT amount of money for so little time left. You'll see that the Implied Volatility was heading up making options contracts worth some pretty good money. This also allowed me to "hedge" against a falloff if earnings went sour. Well, after yesterday's mess, JOYG earnings were also a mess so this stock TANKED by over 20% in 2 days. WOW! Look at the chart above, it's like someone jumped out a window.

Yes, I did get taken out by my stop loss (smart Risk Management), lower than I wanted to because of the $3+ gap open, but there was nothing I could do about that. The Covered Call which I bought back today for $0.15 returned 1,233% in 2 days ($1.85 "profit"/$0.15 "cost"). Of course, this only happened because the stock tanked. Still, by easing into a small position while waiting for the bounce at support (which never happened), and by making money off the Covered Call, I was able to reduce my risk and more importantly, my loss. I could have also bought a cheap protective put as well, which is something I may consider for next time I am playing over earnings as that certainly also would have helped offset losses.

This reminds me of my ANDE trade a few weeks ago when the exact same things happened...HUGE breakout right before earnings, only to be CRUSHED by earnings. Maybe this should teach me a pattern is developing here?Tomorrow is another day. I am waiting on the sidelines for now until i am comfortable the shakeout/correction/abberration is over and trends (Bullish or Bearish) are normalizing.

Happy Trading!