I want to play pre-earning's rise of IV. I have three specific questions regarding IV.
- Does IV rise equally between call and put side? Or does having more volume for example more ppl are buying call side so it sees 95% IV, while put side is bought less so sees 85% IV? Or would both sides have equal 95% IV call & put side for the same strike?
- How can I see when IV usually begins to rise for a ticker before earning's, if it's 2 weeks out or 3 weeks out? Maybe site shows historically when IV begins to rise before earning's for different tickers?
- How can I see how high IV usually runs for certain tickers before earning's? For example one ticker is at 70% IV but gets as high as 250% IV on day of earning's vs another ticker is 50% usually and only gets as high as 120% on earning's. My strat would benefit better from the higher IV in this case.
I'd like to open OTM call debt spreads on tickers reporting earning's 2-4 weeks out, to capture the IV rise in my call, opening right when IV starts to rise. This IV rise will offset Theta decay in my call, which may even appreciate from price action as it moves directionally, and the short leg's so far OTM will actually Theta decay and won't see much of the IV rise.
Essentially, a slightly cheaper call bought to play pre-earning's, which will profit from rise of IV, won't Theta decay as IV rises or rather Vega will offset Theta, and has its overall cost slightly reduced thanks to short leg, which is so far OTM will actually Theta decay and won't rise with IV or rather Theta offsetting Vega. Then close before earning's for a profit. Need more insight on IV historically though.
Advanced Questions Regarding IV – Vega Play
byu/breakyourteethnow inoptions
Posted by breakyourteethnow
1 Comment
My favorite strategy to *hold through earning’s* now is a diagonal, if am bullish will open on the day of earning’s when IV is highest a short leg far OTM, capturing massive premium due to IV being so high, and open long legs slightly OTM with 3-4 months till expiration.
For example, AVGO reports 9/5, on this day when IV is highest I can sell to receive a massive premium, or a hefty down payment on my long legs. If the price is $166 right now, if today were earning’s I’d open $175/$200 (9/13-12/20). I still collect a fat premium from the $200 weekly cause IV is so high on day of earning’s. If price pops $185, my $175 is ITM with months left till expir., and my $200 expires collecting all the premium. Then I can keep selling, collecting more premium, and rolling out if facing assignment, closing the spread about a month before long legs expire so Nov. to not deal with Theta decay ramping up in the last month.
This is the best strategy for holding through earning’s. What I detailed in this post or the Vega play is the best approach to pre-earning’s imo. I’m simply utilizing the environments correctly with the most optimal options structures. Totally outside of earning’s, am opening calendars when IV is irrelevant, opening Theta positive positions or calendars and being Thetagang.