Expected Earnings Move

Need Help...

Iv heard reference on TOS webcasts about the ability to figure projected $ moves of underlying @ earnings using the difference of front month and back month straddles or strangles...

does the concept sound familiar?

how do you figure the expected move?

Thanks

 

To get the approx. expected move on earnings just look at the price of the front-month ATM straddle.

 

say front month straddle is 4.0.. how does that translate into a expected move in the underlying?

thx

 

That means a $4 move is expected.

 

You still have to be careful of what happened with Google's recent earnings announcement. Most of the time, you should make money short-selling the straddle/strangle. From time to time, you'll get hammered badly. Eat like a bird, poop like an elephant.