Selling IV before earnings: Buy 1 Nov 15 CALL Sell 1 Aug 15 CALL Buy 1 Nov 15 PUT Sell 1 Aug 15 PUT and then buying it back a few days after the stock has settled. With 15 being ATM.
logic is to profit from selling very high IV near earnings. however since you buy a nov 15 straddle, you will have to pay lots of premium. (options you buy are much longer term). to decrease premium paid, sometimes they buy nov strangle such as buy nov 16 call and buy nov 16 put. (slightly off-strikes) ideal scenario should be no earnings surprises, short term IV crashes, short AUG straddle is bought back with a handsome profit or let expire, purchased NOV straddle (or strangle) is sold with very little loss.
Whenever dealing with these kind of positions that have more legs than a centipede, you have to be very mindful of commissions and bid/ask spreads. Paper trading this stuff, you don't have to deal with the reality of actually getting a fill at an attractive price when entering & exiting. Doing it for real is an entirely different ballgame. Translation: things better go your way significantly to make up for commissions and bid/ask spread.
made an error. last part of first paragraph should be "...buy nov 16 call and buy nov 14 put. (slightly off-strikes)" also while trying to enter/exit position, make sure you are not giving orders for individual option positions but option combinations. such as try to buy AUG 15 straddle. this way you will enjoy smaller bid/ask spreads and less exposure to execution risk.