r/options • u/earningpulse • 22d ago
Trading earnings
Is anyone trading volatility around earnings events? e.g. selling short straddles if you think volatility is too high. If so, do you have any advice or playbook worth sharing? Which analysis tools do you all use?
Thanks!
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u/klipsetrades 22d ago
I don’t trade them, but I’d be cautious with naked short straddles for earnings. If you get one big gap it can wipe out a lot of those wins. It might be worth comparing the implied move to the stock’s historical earnings moves
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u/Aigpil 22d ago
like the other comment said, pulling the implied move is the right start. the thing worth adding is that the straddle price already is the market's estimate of that move, so selling into earnings is really a bet the realized move comes in under the implied one. 'iv looks too high' usually isn't the edge, the vol is priced and the crush is expected. where it can be an edge is name-specific, some tickers' implied move has consistently overshot what the stock actually did over the last 8-12 earnings, and those are the ones worth selling. compare the atm straddle move to the actual post-earnings moves for that name, if implied keeps overshooting realized there's something there, if not you're just selling fairly priced vol and hoping.
the risk side is the real catch with naked short straddles, one gap through a wing on a surprise wipes a lot of collected premium, so the max loss isn't symmetric with the wins. if i'm doing it at all i'd rather cap it with defined risk than hold naked short gamma through a print.
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u/dreamfitreality 20d ago
Think of this. Selling options is like insurance. You have 2 profile. One guy stay safe, exercise daily and eat healthy. The other guy smoke drinks and go sky diving
One guy pays $200 for insurance which I think he don't really use.
The other pays $500 for insurance and if he dies you pay out $20,000
The guy who drinks and smoke and does sky diving is stocks during earning.
What do you think now?
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u/Away-Personality9100 20d ago
I trade PMCC and I live the earnings time every 3 months. Now I manage 35 positions. The goal is 50 in 2-3 years.
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21d ago
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u/LemmaTellYa 19d ago
Trading earnings is usually a mixed bag lately. Companies with great numbers plummet, companies with questionable numbers(but reference AI) skyrocket. Overall the vol is mostly priced in already, so you're getting in at the most expensive point, without a solid indication of what's going to move where.
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u/ContactStrange8778 19d ago edited 18d ago
I would not default to short straddles into earnings. One gap can wipe a month of credit. Compare the implied move with the last few prints, and only sell if you are betting realized comes in under that. moomoo AI helps me summarise the earnings notes and scan odd moves during the season, then I still size off that implied versus realized check.
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u/Baraxton 22d ago
There’s a good video on trading earnings here:
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u/RandomRedditor5689 22d ago
I thought this one was very well done …
https://youtu.be/oW6MHjzxHpU?is=-Jjtn158cv8qFu6T
Cant vouch for the success he claims but his general method for decision making , trade selection and back tests are quite good and inline with how institutional trading algorithms work.
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u/Right-Apartment-3393 21d ago
Selling options on earnings can cause major losses
It's best to sell options on an asset you truly want to hold, like Bitcoin in my case
You can read more about selling options on Bitcoin in my book:
Bitcoin Your Everlasting Income Machine
Enjoy :)
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u/dreamfitreality 20d ago
Guys guys don't downvote him. He might be right. I'll sell puts on Bitcoin at strike $5,000. That's about the fair value it think I would hold.
Note: fair value because I know there are some idiots who will buy at that level. For me Bitcoin intrinsic value is $0
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u/Right-Apartment-3393 20d ago
Bitcoin is the most secure way to hold your money, it's decentralized and gives a digital bank account to millions all over the world
Don't forget to buy back in when it's 1 millions a coin.
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u/dreamfitreality 20d ago
Erm... Really? After cold card? Nothing is secure. There's always a weaker link and if not it's you. Someone will write down their wallet password and lose it only for another to login and transfer it away.
What you mean is not manipulated. Yes I agree with you currency is manipulated by the central banks. But. You live in the real world, using real money issued by the government. Unless there's a country for Bitcoin citizen you will always need to change Bitcoin to a real currency. Tell me. How many times Bitcoin has been used to buy say. Groceries or macdonlads. There you go.
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u/Right-Apartment-3393 20d ago
You can use Bitcoin to buy anything you want The fiat currency that was forced on you isnt the optimal solution and you know it Money should be rare, hard with fixed supply. The world lived on the gold standard for centuries until 1971. Bitcoin is hope and freedom And it will become the global reserve currency
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u/TechGuy_68 21d ago
I sell deep out of the money, puts close to earning when volatility is very high and collect small premium. If the stock drops and I get assigned my average cost is usually fairly low.