Please ensure Javascript is enabled for purposes of website accessibility
Earnings Trader
Collect the Biggest Option Payouts Every Quarter

Cabot Options Institute – Earnings Trader Issue: January 30, 2023

Weekly Earnings Commentary

We’ve had a good start to earnings season with three out of three successful trades. We hope to extend our winning streak this week using two or three of the stocks mentioned below.

  • Pfizer (PFE)
  • Caterpillar (CAT)
  • McDonald’s (MCD)
  • Merck (MRK)
  • Apple (AAPL)
  • Starbucks (SBUX)

We discussed numerous trades in our weekly subscriber-only webinar going through each trade in a step-by-step manner. My hope is that we can make two to three trades this week. Our average number of trades per earnings season is approximately eight to 10 trades.

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 (1/30-2/3) 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

Starbucks (SBUX)

SBUX is due to announce earnings Thursday after the opening bell. The stock is currently trading for 109.02.

IV Rank: 33.4

Expected Move for the February 10, 2023, Expiration Cycle: 103 to 115

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 103 to 115.

If we look at the call side of SBUX for the February 17, 2023, expiration, we can see that selling the 116 call strike offers an 81.94% probability of success. The 116 call strike sits just above the expected move, or 115.


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 103. The 98 put, with an 84.74% probability of success, works.


We can create a trade with a nice probability of success if SBUX stays within the 18-point range, or between the 116 call strike and the 98 put strike. Our probability of success on the trade is 81.94% on the upside and 84.74% on the downside.

Moreover, we have a 6.0% cushion to the upside and a 10.1% margin of error to the downside.

If we look at the earnings reactions since 11/15/2006, we can see that there have only been a few breaches of 6% to the upside or downside after an earnings announcement. As a result, an iron condor looks plausible. However, I would like to widen my current range if and when I make a trade this week. As always, IF I decide to place a trade in SBUX, I will send a trade alert with updated data.


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


Sell to open SBUX February 10, 2023, 116 calls

Buy to open SBUX February 10, 2023, 120 calls

Sell to open SBUX February 10, 2023, 98 puts

Buy to open SBUX February 10, 2023, 94 puts for roughly $0.85 or $85 per iron condor.

Our margin requirement would be roughly $315 per iron condor. Again, the goal of selling the SBUX iron condor is to have the underlying stock stay below the 116 call strike and above the 98 put strike immediately after SBUX earnings are announced.

Here are the parameters for this trade:

  • The probability of success – 81.94% (call side) and 84.74% (put side)
  • The maximum return on the trade is the credit of $0.85, or $85 per iron condor
  • Max return: 27.0% (based on $315 margin per iron condor)
  • Break-even level: 116.85 – 97.15.

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

February 6, 2023.