Katie has an inverted strangle on in X. She’s short the 37 call and short the 40 put. Her strangle is considered inverted because the short put strike is higher than the short call strike. Now that $X earnings are over, Katie needs to determine whether or not she wants to remain in the trade.

The trade has incurred a loss of $1.50, however Tony points out that there is still about $2.00 worth of premium left in the spread and the stock is right between her short strikes. If she remains in the trade and covers it at expiration with the stock trading between her short strikes, then she’ll be up $1.00. It’s the perfect price right now, just not the perfect time.

Katie decides to wait it out, and Tony encourages her to set some guidelines to ensure the trade stays manageable from a risk standpoint. In short, if the stock price of $X tests either of her short strikes at any point in time between now and expiration, then she will close the trade.

Lastly, Tony and Katie look at $GDX, which has been performing on its weaker end. They consider trading a covered call because it enables Katie to better determine how “aggressive” she wants to be directionally by changing the amount of long deltas she has. Instead, however, Katie decides to trade a short naked put, which has a lower buying power reduction and a slightly higher probability of success.