Long or short the straddle, it's a crap shoot. You're better off going long a May straddle on a projected ramp in vols, choose a ticker. You can buy the straddle in goog and trade you delta position, but it does nothing for your vega risk.
projected ramp in vols? Doesn't going synthetic on the straddle reduce vega risk quite a bit? (by two) I guess you could either convert short stock on synthetic to short calls when going interday to neutralize vega (but then deltas don't stay balanced), or do something more esoteric like keeping short calendar spreads open while doing this. of course, there's a directional characteristic to that 'hedge'.
No, it does nothing for vega risk. Your gamma can bail you out on a large move in the long straddle, regardless of where vols settle after the report. Attenuating vegas requires selling premium against your long straddles. The trade to have was the 470 calendar over the last two weeks. It went from 500 to 750. I used the proceeds to place that bet on black with the 440-500 fly. The gamma trade to have was the long May 460 straddle at 26% vol. It produced free gamma scalps. IV did well with that one. My "ramp in vols" comment is directed at any ticker reporting next week. Buying the atm APR/MAY time spread is a good bet. I like the POT 180 spread from $4.50, among others.
buy apr/may = short apr, long may right? or do you mean may/june spreads next week? i thought long calendars benefit from a rise in IV ... so are you implying not holding thru earnings?
Correct . Just one thing to add :if skew is exists , you have to factor it in by calculating future vols based on stock's movement. If you don't have tools to do it , than just go more aggressive ( lesser interval) shorting on the way up and a passive buying on the way down.