Today, following an earnings report, I exited a winning calendar spread trade in SoFi Technologies $SOFI.
Let me start by saying this was a win. But it wasn't the win I was hoping for.
Here's the plan I laid out for All Star Options subscribers this past Thursday:
"I like buying a $SOFI Oct31 (weekly)/April $31 Call Calendar spread for an approximately $3.90 net debit. This means I'll be short the October 31 (weekly) $31 calls and long an equal amount of the April 31 (regular monthly calls). The debit I pay today is the most I can lose.
Notice for the short calls, I'm using the weekly options that expire on October 31. These calls have a lot of premium priced in because this is the expiration most immediately after their upcoming earnings event scheduled for October 28. Following the event, options premium will most rapidly come out of these calls, aiding this call calendar spread.
If SOFI trades to or above $31 coming out of earnings and before the short calls expire worthless, then I'll close the spread for whatever I can get for it—most likely at a small profit.
If $31 is never hit between now and October 31, then I'll be left with the April $31 calls and the potential of unlimited upside. This is what I really want.
That said, if $SOFI loses the $25 level, this trade is likely a goner. The short calls will have cushioned the blow on the loss of the April calls, but I'll look to exit for whatever I can salvage."
Well, earnings was a hit and $SOFI traded to and through my $31 strike level. So, according to my plan, I exited and earned a respectable profit:
But this wasn't the kind of win I was looking for.
What I really wanted was for the short call in the calendar spread to expire worthless this coming Friday, leaving me net long those April calls. Looking at how the stock is positioned now, it appears ready to make a real move.
In hindsight, I'm kicking myself for selecting strike prices too close to the current action. Perhaps I should've selected the 34 strike to position my calendar spread? That would've given the trade more breathing room.
I stuck to my plan. There's no shame in that. And it certainly feels uncouth to complain about a winning outcome.
But this is how we get better.
Honestly reviewing our results—finding the things we could have done better while celebrating what we got right—is essential to growth as a trader.
Yes, I made money.
Yes, I followed my plan.
But could I have structured the trade better to capture the kind of move I was really after? Probably.
The calendar spread worked mechanically. The earnings catalyst played out. The trade made money. But the strike selection may have been suboptimal for what I was trying to accomplish.
This is the constant tension in trading: balancing the probability of success against the magnitude of potential wins. Tighter strikes increase your chances of making some profit. Wider strikes decrease probability but increase the potential for home runs.
I chose tight. It worked. But watching SOFI rip higher now makes me wonder if I should have been more aggressive with my strike selection.
The lesson isn't that I was wrong. The lesson is that even winning trades teach us something about our process and decision-making.
Next time I structure a calendar spread around earnings, I'll be asking myself: am I optimizing for a small win or positioning for a potential monster? Both approaches are valid, but being intentional about which one I'm choosing matters.
Sometimes the best learning comes not from our losses, but from examining our wins and asking: could this have been even better?
Sean McLaughlin | Chief Options Strategist, All Star Charts
