It seems like buying calls and puts before a company announces its earnings (assuming the company is optionable) is a very common practice. Am I right in thinking this? And do any of the people on this sub do exactly that, along with any other strategies they employ?
Posted by SnakeRights72
12 Comments
Never done that, but will try that next time. My idea is to buy call and put at same strike same exp date, only on stocks that have high ATR. Hopefully the winner will run multiples of the loser.
Usually history will tell if there is a run up or run down about 2 weeks before earnings. If you get in early enough you can make good money with IV getting closer to the date that you can safely take profits or leave some to run.
I have done that and lost money on tgt,tsla
Betting on earnings isn’t a “strategy”; it’s gambling. Yes, there’s quite a bit of it. And, as with any other gambling activity, you hear about how much they won from the winners, but rarely hear anything from the losers.
I avoid earnings as they are unpredictable and more like a gamble than sensible trading . . .
No. It’s not unless you sell same day. The Implied Volatility is elevated which makes the Option much more expensive. Smart money waits until after ER. You can’t make money unless the earnings are blow the top off or opposite beyond what’s expected.
RTFM. This strategy has been discussed tons of times here. In fact, every time a newbie who’s learnt what a call and a put are, they come up with this surefire way of winning by buy a call and a put.
Common. But less successful than people here might have you think. The sharp reaction to earnings is often less about last quarter and more about guidance for the next quarters. So getting all of that right is trickier than most think
Buying high implied volatility options and holding through earnings is generally a crapshoot because IV collapses post EA.
Utilizing strategies to capture that high implied volatility there’s a more reliably grind out gains.
Sure, earnings and other are sometimes referred to as binary events, things known to have directional trends. In its simplest form, if one feels earnings will favor an increase in a stock’s value, one might buy the stock before the report. Conversely if thinking the stock will go down due to the report, one might dump the stock.
Options are no different. More long options might be employed to take advantage of whatever direction we believe the underlying will move. Or we might reposition our short options more favorably with or out of reach of the expected underlying move.
Buy options around earnings comes with a pretty hefty premium. You’ll need a pretty good reason to be buying them to have a strategy with positive expectancy.
Yes it’s called r/Wallstreetbets