Volatility before earnings discussed: https://www.stern.nyu.edu/sites/def...raders and Volatility Information Trading.pdf https://research.sabanciuniv.edu/id/eprint/24514/2/volatility_spreads_and_earnings_announcements.pdf https://www.econstor.eu/bitstream/10419/262360/1/1813796823.pdf http://www.columbia.edu/~amm26/publication files/Vega risk and the smileJoR.pdf https://www.palmislandtraders.com/econ136/volatility_skew.pdf https://www.risk.net/sites/default/...t/data/risk/pdf/sponsor/bankamerica_40_42.pdf https://www.mit.edu/~junpan/npp.pdf https://scholarworks.umass.edu/cgi/viewcontent.cgi?article=2280&context=dissertations_2
Weeklies and one point (even half point for many stocks) strikes intervals killed this game. Or at least made it very difficult.
Large bid/ask spread. Years ago, if XYZ was at 44, everyone was trading (long or short) 45's strike and the same expiration (3rd Friday of the month). Now the SAME volume spreads over to 42, 43.5 , 44 , etc AND different weekly expirations. Hence, the larger bid and ask spread. I used to trade 100 stocks per qtr but now hardly can find 20.
That’s not how market makers look at the world. More refined hedging allows them to quote tighter. Volume per strike is lower because of penny increments and microstructure changes where you don’t have MM quoting massive size on the ISE in order to secure a percentage of allocation.
The idea of trading earnings vol is a known strategy, MMs are well aware and the implied vol is more efficient. Has nothing to do with the weeklies or strike intervals.