After a few weeks of earnings announcements, we are finally entering into the heart of earnings season.
As you can see below, some of the major market drivers are due to report this week.
Courtesy of Slope of Hope
Of the 65 stocks above, I’ve chosen to highlight thirteen highly liquid stocks, with highly liquid options in the table below.
[text_ad use_post='261460']
My hope is that, by going through the process, you will get the hang of how to use both defined and risk-defined options strategies around earnings announcements. I’m certainly not saying that the thirteen stocks chosen will offer the most profitable trades, no one has a crystal ball. But you will have the opportunity to learn how to use some incredibly powerful options strategies in an accelerated environment – earnings season.
As we know, due to the uncertainty around earnings announcements, both speculators and hedgers create a huge demand for options around earnings. This increase in demand increases the implied volatility, which ultimately increases the price of the options in the underlying stock that is due to announce. Basically, options prices are inflated around earnings announcements and as sellers of options our goal is to always take advantage of the price discrepancies seen around earnings.
Below you will find the implied volatility, IV rank, IV percentile, average past price movements around earnings, expected move (implied move) and a few other key items to help you with any potential trades.
Just remember, the following is for educational purposes only.
Here are some of the highlights for this week. I use the following list as a guide for any potential earnings season trades. If you have any questions on the information provided below don’t hesitate to email me or ask in the comment section below.
I will be adding the price of a strangle, iron condor and a jade lizard using the 80% probability of success as the foundation of the trade for each going forward. This will give you some insight as to which strategy works best given your risk profile.
We can always create a trade with a nice probability of success using a variety of options selling strategies. At the top of the food chain would be the undefined risk options strategy known as the short strangle. Of course, if you wish to use a risk-defined trade, check out the price of an iron condor at various strike widths. I’m using short strangles, outside of expected move and with a probability of success above 80%.
The reason I go outside of the expected move or range is because we know, through extensive research, that 80% of stocks trade within their expected move immediately following earnings.
I will discuss this further in an upcoming post along with several trade ideas
As always, if you have any questions, please feel free to email me or post your question in the comments section below.