Earnings Option Strategy
What are the characteristics of this option strategy?
Earnings Option Strategy is an advanced option strategy with a high potential for reward and a higher potential for risk. This strategy assigns a high degree of importance to being able to accurately predict the short-term direction of an underlying stock in response to an upcoming earnings announcement. This strategy utilizes the premiums of options contracts, combined with a studious understanding of the underlying company’s business, to capitalize on volatility created in the market prior to, and following, an earnings announcement.
Is this a bullish, bearish or neutral strategy?
This strategy can be bullish, bearish, or neutral depending on the direction of the market when earnings announcements are made. This strategy effectively hedges any non-directional bets and allows investors to benefit from market volatility whether it is in an upswing or downswing.
Is this a beginner or an advanced option strategy?
This is an advanced option strategy and requires significant understanding of the underlying asset, its trading history around earnings announcements and the risks associated with trading in volatile markets.
In what situation will I use this strategy?
This strategy is typically used when markets are extremely volatile, such as with short-term, high-impact events such as a major earnings announcements or pricing of a new product.
Where does this strategy typically fall in the range of risk-reward and probability of profit?
The Earnings Option Strategy has demonstrated a capable risk-reward ratio, usually ranging from 3:2 to 7:2, with a probability of profit of roughly 50%.
Here are some templates that you can use to create your own models
Diagonal Spread with Calls Option Strategy
Covered Call Option Strategy
Covered Put
Covered Put
Search for all Templates here: https://marketxls.com/templates/
Relevant blogs that you can read to learn more about the topic
Option Trading With Ms Excel-Protective Puts Strategy
Strap Straddle Options Strategy (Using MarketXLS Template)
Strip Straddle Options Strategy (Using MarketXLS Template)
Earnings Announcement- It’S Impact On Implied Volatility
Difference Between Historical And Implied Volatility