Expected Earnings Move

Discussion in 'Options' started by buybig, May 8, 2008.

  1. buybig


    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 :confused:
  2. MTE


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


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

  4. MTE


    That means a $4 move is expected.
  5. 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. :)