Volatility Contraction After Earnings Announcements | Market Measures

Find out how much Implied Volatilty contracts after earnings announcements and why we look to sell premium before the event! See more videos from the Market Measures Series: http://ow.ly/EaPpW When we place earnings trades, we are looking to take advantage of the high Implied Volatility (IV) that accompanies these announcements. After the announcement, we assume that volatility will contract and this is why we look to sell premium around earnings. Today on Market Measures, Tom Sosnoff and Tony Battista take a look a all of the underlyings they normally trade to see how much IV actually contracts around earnings. First, the guys find out how often volatility actually contracts. After they find out the over 98% of the time IV contracts, the guys look to put some context around the magnitude of the move. The guys find out that when IV contracts, it does so by about 44% and this is the main reason that we look to sell premium around the earnings announcements! ======== 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 LinkedIn: http://www.linkedin.com/company/tastytrade Follow tastytrade on Instagram: http://instagram.com/tastytrade Follow tastytrade on Pinterest: http://www.pinterest.com/tastytrade/

Comments

1. I did one of these on priceline this year. Before August earnings I put on an Iron condor with the short strikes about 200 points out of the money. I got 5.15 credit, and put in a limit order to close at 2.50 debit. Managed to a 50% win in 8 days due to the Vol crush. Great piece to share with everybody. Thanks for the hard work!