FB right now NOV ATM straddle showing 29% @ $23.50.... I would consider BUYING that straddle now and holding...
On Macy's website : Upcoming Webcast: Q2 2018 Macy's, Inc. Earnings Conference Call Wednesday, August 15 9:30 a.m. ET
Sheesh you got some pretty high estimates eh. I would expect MACY ATM vol to drop to 35% at the open. VIX is pretty low right now. I cant imagine this being over 40%. But we shall see.
Ill check the BBG terminal tomorrow and PM you if the Bloomy algo is estimating something different (which it has done in the past)
Why not time the straddle buy AFTER the earnings data is announced and ride the free gamma rent? You eliminate a tail risk of E/D being changed?
Well, in May 2017 cycle it opened ~11% down and went to -15% pretty quickly. IV doesn't come down completely till 15-30 minutes from the open, and during that time spreads stay pretty high. I doubt you could close the short straddle in the first few minutes, and later it would show a significant loss. Regarding FB - it never gaped more than 9-10% on the open (Maybe except one cycle), and most of the time it moved only 6-7%. It was a very popular stock to short volatility into earnings. We all know what happened this cycle. How about WMT? it rarely moved more than 3-4% - until previous 2 cycles when it moved 10%+. My point: Earnings are completely unpredictable. In order to make money from earnings trades held through the announcement, too many things have to go right and too many things can go wrong. Selling options around earnings have an edge on average for most stocks, but they have a much higher risk than buying options, especially if the options are uncovered. Don't confuse high probability with low risk. You can win 70-80% of the time, but you can also lose few times in a row. And when you lose, you can lose big time. Those "one in a lifetime events" happen more often than you believe. Even if you did your homework and backtesting and decided to hold your trade through earnings, always assume a 100% loss and size your position accordingly. Even if the backtesting shows 90% winning ratio for a certain strategy, one huge move (in any direction) can erase months and months of gains.
Summary: There is risk in this strategy. I assume your subscribers are not told your approach has no risk at all? Risk here is managed by a lot of things but if a stock gaps more than expected I close the position and move on to the next one. . Also I do more calendars than straddles where risk is more controlled for me.