Properly Using Double Calendars & Diagonals Through Earnings.

This is imo one of the most challenging options plays to pull off, but one of the most cost-effective and rewarding on short term timeframe if done correctly. It's playing earning's using diagonal spreads; or horizonal spreads if using calendars.

There are 3 variations selling further OTM aka double diagonal, selling the same strike aka double calendar, or selling closer ITM aka iron condor (because difference in dates it's a diagonal iron condor).

Pros & Cons to 3 Variations:

1. Double diagonal: will provide least amount of premium, but will create difference in intrinsic value so if strikes are blown out will still be able to close for profit. The problem is one side is always losing so this increases initial costs by substantial amount.
2. Double Calendar: will have a breakeven point on either side unlike the double diagonal because the intrinsic values are identical when buying and selling the same strike. You receive more premium helping offset losing side and face no spread loss but if a strike is blown out the entire structure will lose.
3. Double Diagonal Iron Condor: will sell the strikes closer than the buy providing most amount of premium possible, offsetting the losing side greatly but creating potential spread loss on winning side. The breakevens are even closer now, putting entire structure at a loss faster due to spread loss.

Prior Results: For 3 weeks in a row, went 11/11 earning's correctly predicting almost to the dollar the earning's implied move. The fourth week went 8/16 earning's, I could not understand why or what went wrong.

My solution was to add more time to the long legs, suspecting the IV crush was destroying my profit in the long legs. Initially, was selling week of earning's and buying following week. So started buying the 2nd week out instead of the following, this progressed to going as far as a month out to keep reducing IV in long legs. It worked, on some companies.

Again, was back to where I was, not able to understand why this was failing me now this time if had created solution to the problem by adding more time.

The Solution: By going further out in time, I was offsetting IV crush but increasing the dollar amount invested in the losing side, which would in return cause greater losses as direction moved against. I was selling disproportionate IV (selling 150%+ in short legs, buying 60% in long legs), but my spread had disproportionate amount of time difference, selling just a day and buying a month out counteracting each other.

I've finally figured out what's been going wrong. When I went 11/11, was playing big companies like TSM, Mag 7, but the week went 8/16 was playing companies like CVS, Monster, Airbnb. Buying more time isn't the solution, going further out in time just raises costs on losing side greatly and if strikes are blown out, the solution is buying companies with right IV environment to begin with.

CONCLUSION: Opening calendars on earning's, the most important factor is the company itself. Large big Mag 7 companies will have far more accurate suggested implied moves, and more importantly will have much lower IV in the following week. This allows buying long legs for cheap cost, not requiring going further out in time to avoid IV crush, because they have much lower IV to begin with than smaller high beta companies like Monster and Airbnb. So this strategy can only be played if long legs of the following week are not drastically spiking in IV, cause going further out in time is not the solution.