Earnings Trades Simplified.
Earnings announcements are public announcements that display a company’s earnings, or lack thereof. As the earnings announcement gets closer, implied volatility tends to increase. After earnings are announced,...
the uncertainty of what will happen diminishes, and usually we see a rapid decrease in implied volatility because of it. Because of this phenomena, we tend to stick to premium selling strategies when it comes to earnings plays. We can take advantage...
of the implied volatility crush by selling premium prior to the announcement, and buying it back after the announcement.
Earnings trades are not for everyone, as they involve high amounts of uncertainty and random movements.
Why Trade Earnings -
-Increase number of occurrences, many trades available so increases of our probability of profit.
-High IV opportunities
-Short term Binary event leading to drastic volatility crush.
Factors to consider when placing earnings trade -
1. Expected Move
2. When to place trade
3. Historical Moves
4. Strategies based on market conditions