This is a series of posts to test how well selling options perform for earnings plays. Earnings are considered the most risky and many think of it as gambling.

When companies release earnings 4 times a year, it’s considered a binary event where the stock can experience large moves. Because of these violent moves the options can become very expensive.  Since the options are very expensive the idea is to sell them to other people or put another way, go short the options.  You sell options above and below the current stock prince, in effect sandwiching the stock within a range that you don’t think it will break out of.

Think Or Swim (TOS) has available many statistics including the expected move.  So you sell options right outside the expected move of the stock.

The hard part is managing the losers, when the stock exceeds the expected move putting the options into a loss.  That’s when you have to use rollover strategies to recover from the trade. That is the hard part and which is the most crucial part of selling options, imho.