Defined Risk Options Strategies Around Earnings

Tom Sosnoff and Tony Battista look into using defined risk options strategies around binary events such as earnings. They analyze a number of different strategies to find out which ones provide the best return on capital and probability of success. ======== tastytrade.com ======== Finally a financial network for traders, built by traders. Hosted by Tom Sosnoff and Tony Battista tastytrade is a real financial network with 8 hours of live programming five days a week during market hours. Tune in and learn how to trade options successfully and make the most of your investments! http://goo.gl/EaF69C Subscribe to our YouTube channel: http://goo.gl/Szl24S Watch tastytrade LIVE daily Monday-Friday 7am-3pmCT: http://goo.gl/EaF69C Download our mobile app, Bob the Trader: http://goo.gl/zgIyco Follow tastytrade on Twitter: https://twitter.com/tastytrade Become a fan of tastytrade on Facebook: https://www.facebook.com/tastytrade Follow tastytrade on Pinterest: http://www.pinterest.com/tastytrade/

Comments

1. Very interesting study/insights, but there was no info on the exiting of these different types of trades. When /under which conditions do your exit these trades ? Simply the day after earnings ?
2. Hi, Pal T - Here are some important criteria we go through:
   • Enough liquidity in options
   • Check previous stock movement and post earnings movement, and then come up with your own assumption of directional bias after earnings (this varies by individuals). Let’s say if you are a contrarian like us, we would more likely to short put than call if the price has been beaten down for a while
   • Check the potential movement by using pre-earnings IV and choose 1SD/2SD or any strikes we feel comfortable with. There is no universal rule for choose your trade risk
   • If you have higher risk tolerance, use naked options, if not, use IC or spread to define your risk
   Please remember that trading earnings should use small percentage of your capital, it associates with higher risk in short-term, which is hard to manage. Hope this helps - thanks for commenting!
3. i get the whole vol contraction idea around earnings. But how do you know what to short? Put or calls? and how far away from ATM? Or do you short a Neutral Strategy play, like a short iron condor or something that's similarly safe?
   Any feedback would be great! Love your team and sites. Im a member :)
4. This study sounded great, but then I noticed your second set of data had 5 fewer trades. I thought all the same trades in the first set were supposed to be in the second set?