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Earnings Trader
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Cabot Options Institute – Earnings Trader Issue: January 17, 2023

Weekly Earnings Commentary

Last week we entered our first trade of the earnings season. Last Friday, JPM announced earnings, and the stock immediately pushed lower after the release. The stock opened at 135 and tested the short 133 put of our iron condor. As a result, we decided to exit the one-day trade for just over 4%, not too bad for a one-day gain. Of course, JPM continued to trade higher, giving those that decided to hold on to the trade a little longer the opportunity to take the trade off the table for roughly double the return.

This week offers a few decent earnings candidates with Netflix (NFLX) and Procter & Gamble (PG) leading the way. NFLX is an underlying stock that I typically do not trade, due to the historical earnings reactions, so I’ll be going over a potential trade in PG in our “Trades of the Week” section below.

There is a good chance we go without an alert this week, but that certainly will not be the case when next week rolls around as earnings truly start to ramp up.

If you have any questions, please do not hesitate to email me at

Top Earnings Options Plays

Here are a few top earnings options plays for this week (1/16-20) if you are so inclined:


Courtesy of Slope of Hope

Trade Ideas for Next Week

As a reminder, you will quickly begin to notice I tend to stick with stocks that have high liquidity as it’s far easier to get in and out of a trade. Medium liquidity offers tradable options, but sometimes the bid-ask spread is wider, which means a greater potential for more price adjustments, making entering and exiting a trade difficult from time to time. Remember, there are roughly 3,200 tradable stocks with options and 11% have medium liquidity while only 3% have what’s considered high liquidity.

Potential Trade Ideas for Next Week

Procter & Gamble (PG)

PG is due to announce earnings Thursday before the opening bell. The stock is currently trading for 150.88.

IV Rank: 25.1

Expected Move for the January 27, 2023, Expiration Cycle: 146 to 155

Knowing the expected range, I want to place the short call strike and short put strike of my iron condor outside of the expected range, in this case outside of 146 to 155.

If we look at the call side of PG for the January 27, 2023, expiration, we can see that selling the 157.5 call strike offers an 88.63% probability of success. The 157.5 call strike sits just above the expected move, or 155.


Now let us move to the put side. Same process as the call side. But now we want to find a suitable strike below the low side of our expected move, or 146. The 143 put, with an 84.90% probability of success, works.


We can create a trade with a nice probability of success if PG stays within the 14.5-point range, or between the 157.5 call strike and the 143 put strike. Our probability of success on the trade is 88.63% on the upside and 84.90% on the downside.

Moreover, we have a 4.4% cushion to the upside and a 5.2% margin of error to the downside.

If we look at the earnings reactions since 10/31/2006, we can see that there have only been a few breaches of 4% to the upside or downside after an earnings announcement. As a result, an iron condor looks plausible. As always, if I decide to place a trade in PG, I will send a trade alert with updated data.


Here is the potential trade (as always, if I decide to place a trade in PG, I will send a trade alert with updated data):


Sell to open PG January 27, 2023, 157.5 calls

Buy to open PG January 27, 2023, 162.5 calls

Sell to open PG January 27, 2023, 143 puts

Buy to open PG January 27, 2023, 138 puts for roughly $0.60 or $60 per iron condor.

Our margin requirement would be roughly $440 per iron condor. Again, the goal of selling the PG iron condor is to have the underlying stock stay below the 157.5 call strike and above the 143 put strike immediately after PG earnings are announced.

Here are the parameters for this trade:

  • The probability of success – 88.63% (call side) and 84.90% (put side)
  • The maximum return on the trade is the credit of $0.60, or $60 per iron condor
  • Max return: 13.6% (based on $440 margin per iron condor)
  • Break-even level: 158.10 – 142.40.

As always, if you have any questions, please do not hesitate to email me at

The next Cabot Options Institute – Earnings Trader issue will be published on

January 23, 2023.