Options going into earnings

Discussion in 'Options' started by penny4urstocks, Jul 10, 2013.

  1. First off just want to say hello and feel this is a very nice informative forum. I have been retail trading for years and like many lost alot at first but now I have become better over time.

    So now I recently began trading options and have found its pretty much the same but with higher risk.

    So my question is this Lets suppose a company is about to release earnings in a week. Now the price is 13.00. Isn't it pretty safe if you buy next month calls at 15.00 and puts at 11.00?

    Of course one will expire worthless but if the options have high Delta you should in theory break even or gain profit. The variables taken into account of course would be stock trades flat, the run-up into earnings or decline, profit taking, bad news etc.

    Using stop-loss orders of course also come into play when either option gains a nice return going in.

    The great thing about options is that you don't really kick your self when you sell for profit because of time decay.
  2. Sintra



    If you buy a 15 call and a 11 put then you will lose money when the stock stays between 11 and 15 at expiration. Even when it crosses a strike there is still the possibility to lose a lot of money. Your options are both OTM and thus have a low delta.

    Options is not pretty much the same with different risk. It is a very complicated and most of all asymmetrical. I was a MM and prof and still learning about earnings. It is very interesting but not easy.
    What you suggested could be a could way to learn stuff. OTM don't require a lot of premium. Make sure you calculate your pnl by calculating delta,vega en theta. This is a good way to understand some of the basics.

    Good luck
  3. kroponer


    Look up 'option straddle' on google. Also look up 'options straddle before earnings'.
    You can also search for it here on elitetrader, we've had the discussion before.

    Generally, the volatility will be priced into the options before earnings, and will collapse hard after announcement. More to it than that, just do some searching.
  4. Thanks everyone for the links and info. Going to research this more.