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: November 14, 2022

Weekly Earnings Commentary

As I discussed in our subscribers-only webinar on Friday, this week should be the busiest trading week of the earnings cycle.

Several of the big box retailers are due to report including Home Depot (HD), Walmart (WMT), Lowe’s (LOW), Target (TGT), Cisco Systems (CSCO) and a few other notable names. All offer good volume and all are currently offering some decent premium for trades with at least an 85% probability of success, if not slightly higher.

I expect that we will see at least three trades, if not more, this week before we enter the doldrums of another earnings off-season that begins in earnest next week.

As always, we will continue to seek trades on a weekly basis, but expect trading to be few and far between.

I’ve been thinking it could also be a good time to start adding a few short strangles to the mix, since I’ve purposely kept the strategy on the sidelines. Yes, my intent was to use it a time or two during this earnings cycle, but I decided against it for a variety of reasons, mostly a pronounced increase in the price movement around earnings reactions. My goal is to spend a little more time going over examples of how I use short strangles, in a variety of ways, around earnings announcements. So expect to see weekly examples/ideas in each one of our issues leading up to the next earnings cycle.

As a reminder, we will have a subscriber-exclusive webinar every Friday during earnings season, so make sure to sign up. Register here.

And of course, as always, if you have any questions please do not hesitate to email me at

The Week Ahead

Below are several companies that I think could offer a few trading opportunities.

Below are a few more ideas for those of you who tend to be a bit more aggressive.

Top Earnings Options Plays

Here are a few top earnings options plays for this week (11/14 to 11/18) 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.

Walmart (WMT)
Walmart is due to announce earnings Tuesday before the closing bell. The stock is currently trading for 142.58.


IV Rank: 57.7

Expected Move for the November 18, 2022, Expiration Cycle: 136 to 149


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 136 to 149.

If we look at the call side of WMT for the November 18, 2022, expiration, we can see that selling the 152.5 call strike offers an 88.92% probability of success. The 152.5 call strike sits just above the expected move, or 149. We can define our risk through buying the 157.5 call, thereby creating a five-strike-wide bear call spread at the 152.5/157.5 call strikes.


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 136. The 133 put, with an 85.04% probability of success, works. Staying with a five-strike-wide spread I can buy the 128 put to define our risk and create a bull put spread at the 133/128 strikes.


We can create a trade with a nice probability of success if WMT stays within the 19.5-point range, or between the 152.5 call strike and the 133 put strike. Our probability of success on the trade is 88.92% on the upside and 85.04% on the downside.

Moreover, we have a 6.9% cushion to the upside and 6.7% margin of error to the downside … well outside every historic earnings reaction in WMT since 2006 (see below).


Courtesy of Slope of Hope

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


Sell to open WMT November 18, 2022, 152.5 calls
Buy to open WMT November 18, 2022, 157.5 calls
Sell to open WMT November 18, 2022, 133 puts
Buy to open WMT November 18, 2022, 128 puts for roughly $0.70 or $70 per iron condor.

Our margin requirement would be $430 per iron condor. Again, the goal of selling the WMT iron condor is to have the underlying stock stay below the 152.5 call strike and above the 133 put strike immediately after WMT earnings are announced.

Here are the parameters for this trade:

  • The probability of success – 88.92% (call side) and 85.04% (put side)
  • The maximum return on the trade is the credit of $0.70, or $70 per iron condor
  • Max return: 16.3%
  • Break-even level: 153.20 – 132.30.

The next Cabot Options Institute – Earnings Trader issue will be published on November 21, 2022.

Andy Crowder is a professional options trader, researcher and Chief Analyst of Cabot Options Institute. Formerly with Oppenheimer & Co. in New York, Andy has leveraged his investment experience to develop his statistically based options trading strategy which applies probability theory to option valuations in order to execute risk-controlled trades. This proprietary strategy has been refined through two decades of research and real-world experience and has been featured in the Wall Street Journal, Seeking Alpha, and numerous other financial publications. Andy has helped thousands of option traders learn and implement his meticulous rules-driven options trading strategies through highly attended conferences, one-on-one coaching, webinars, and his work as a financial columnist. He currently resides in Bolton Valley, Vermont and when he’s not trading, teaching and writing about options, he enjoys spending time with his wife and two daughters, backcountry skiing, biking, running and enjoying all things outdoors.