If the company did very well, it could jump quite a bit due to the earnings news and you can make a few thousand dollars very quickly. On the other hand, you can also lose a few thousand dollars very quickly, depending on how the company did or when the stock moves down.
you could buy some Calls, AND Puts, out of the money. There's a name for this, maybe a Strangle - don't remember i have no actual experience doing this, but i recommend it to all my clients to experiment, try it with just one contract, [i'll waive my normal commission] marc
read this book will give you an example of how to go about it systematically at least. You are correct in that it is completely binary, you will probably either hit the homerun or lose your bet. Thus its important to pick those stocks thats have history of moving a lot during previous releases, even better if they have recent history of moving in the same direction that you're trading, and overlay charts strength, and historical earnings growth. Also, since if you're wrong you will lose 100% (just assume this will happen if wrong) it is important that you risk a small percentage of your account on each trade. Make this amount consist across many trades as you will not be able to forecast which will win and which will not (of the trades you take). Thus you don't want to bet 10k on a loser and only 1k on a winner. also i would probably stick to trading only long calls and long puts as these will offer the largest potential reward and your risk will be capped at the size of your bet.
It's part of the game. I look at the action as cheap leverage. This is when you dial down any pretense about price action....except for wild run ups. According to published research (and simple intuition), a stock that has posted positive earnings for several quarters has a higher probability of continuing to post positive earnings. It is your job to determine when the forecast has gotten out of hand. I think fast charts or value line use simple regressions...not sure. Also, stocks move the opposite way to the earning release 40% of the time. Surprisingly, in symmetrical proportions. (Kinney et al. 2002) Since the stock is expected to move more on earnings, it is your job to size accordingly. How much less? How about inversely proportion to the average IV vs the IV prior to a release? IV is a good indicator for the expected move.
Worth noting!! In a Bull ( upward ) market, it could go up quite a bit from a good earnings report. In a Bear ( downward ) Market, it could go down quite a bit from a bad earnings report. Wrong market, ie Bull and Bad, it won't drop that much and vice versa. So stay on the right side of the Market, ie Bear, Shorts only, more downside to upside generally ( odd exception ), that's how I used to play earnings with great success years back.