Tag Archive: Earnings

Options Trading Series: Earnings

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.


Earnings – ANF

ANF looks ripe to make a move but the options are very expensive. They announce earnings before market open on Nov 14th.

Let’s try a simulated Strangle for fun: Nov Call 31.5 @ $1.69 / Put 31 @ $1.74


ANF seems like a great stock to sell options against, will look into it.

UPDATE 10:29am : What the heck, did ANF cure cancer or something??? They gapped up over 25%!  the Nov 31 calls are at $8.55.  I guess I should have played this one.

Earnings plays – IGT, MTG, FWLT

More fun with options. None of these setups are great, but they’re cheap and with the markets oversold we can either get a snap back reversion to mean or a panic sell off, both are good for earnings plays. If the market wasn’t so crazy I probably would not be taking these trades.

Nov. Expiration

IGT – Call 14 @ $36

MTG – Strangle Call 2/Put 1.5 @ $11

FWLT – Call 24 @ $26