Earnings report straddles

Discussion in 'Options' started by Andy_Trade, Nov 23, 2007.

  1. Any thoughts on this?

    I've tried a bunch of them using the TOS simulator. MA made about a 20% move on earnings day and was about $2,000 profitable. Others had lost a hundred, gained a hundred and anywhere in between.

    I tried the same strategies again a week later with a few more and lost money on all but one (which I made about $60 lol) even a couple that moved almost 10% were losing money!

    Any input is appreciated.
  2. IC contracts after an earnings announcement. So by definition, you're losing money on a long straddle even before you know how much, if any, the underlyingk moves post EA.

    So you either have to have a good selection process to find movers or some other plan to offset that IV collapse (selling inflated options against the straddle). All much easier said than done.

    AFAIK, any way you cut it, you assume risk somewhere in the position (movement, non movement, IV change, etc.). You just have to determine where and how much that risk will be.