Trading earnings (A short thread trying to explain in laymen terms) 👇

Earnings can be traded in many ways and I do it in three different ways -
a) Trading direction
b) Long volatility
c) Short volatility (most common).

Let's talk about each one of them.

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a) Direction - The most difficult way for me to trade esp. before the earnings. For ex, you expect HUL to post a strong set of numbers due to huge demand of consumer items in previous quarter and go long. But, HUL has already run up and the street estimates are also on the +

higher side so there could be profit booking even after strong numbers or if there's a slight miss, street won't like it and stock may fall. Even the technicals don't matter much prior to the earnings as nobody knows what lies ahead in the earnings. Trading directionally post +

result can do better where you can mark certain important support/resistance or supply/demand zones which when taken out post result can present a good trade. I sometimes do trade this way.

b) Long volatility - Here, I take long vega strategies going into the result. +

Volatility usually increases as we move closer to the result and thus resulting in increase in option pricing. I almost always take long straddle trade for this (buying ATM call and put both) much ahead of the earnings (anytime between 13DTE - 5DTE). Since I am buying options, +