The Earnings Trading Secret I’ve Been Keeping (Until Now)

Turn earnings anxiety into your biggest edge                                                                                                                                                                                                                                                                                                                                                                                                                 July 09, 2024 | [Read Online]( [fb]( [fb]( [fb]( [fb](mailto:?subject=Post%20from%20Don%27s%20Trading%20Desk&body=The%20Earnings%20Trading%20Secret%20I%E2%80%99ve%20Been%20Keeping%20%20%28Until%20Now%29%3A%20Turn%20earnings%20anxiety%20into%20your%20biggest%20edge%0A%0Ahttps%3A%2F%2Fdon-kaufman.beehiiv.com%2Fp%2Fearnings-trading-secret-ive-keeping-now) The Earnings Trading Secret I’ve Been Keeping (Until Now) While stocks trade sideways about 75% of the time, they often experience extraordinary volatility after quarterly earnings releases. Many traders view earnings as a gamble, but with the right approach, it can be a lucrative opportunity. In this post, we'll explore how to analyze options ahead of an earnings event, using Delta Airlines (DAL) as our example, which is set to report Thursday morning. Understanding Stock Movement and Options Pricing On an average day, DAL trades within a $1.15 range (its 14-day Average-True-Range). At $46.87 per share, this represents about a 2.5% move. However, for the upcoming earnings report, the options market implies a 6.2% move on Thursday - more than double the typical movement. Calculating The Expected Move - Find the price of the At-The-Money (ATM) straddle. In DAL’s case, we’re looking at the $47 strike for the weekly options expiring on Friday. - The price of the straddle is around $2.87. - Divide the straddle price by the strike price: $2.87/$47 ≈ 6.1% - The slight difference between 6.1% and 6.2% is due to the current stock pricing being under $47 Implied Volatility and Earnings - Implied volatility on the $47 weekly options is about 81%. - For comparison, the 31-day $47 strike options have an IV of 38.5% - This difference illustrates how inflated IV becomes during earnings events. Why Implied Volatility Matters: After the earnings announcement, IV typically drops sharply. This "volatility crush" can significantly impact options prices, even if the stock moves in your predicted direction. For example, you might buy a call option, see the stock price rise, but still lose money on your option due to the IV decrease. The Pitfalls of Simple Options Strategies Buying calls or puts outright before earnings is risky because: - The stock needs to move enough to overcome the IV crush - It’s an all-or-nothing bet with inconsistent results. A Game-Changing Approach to Earnings Options Trading What if I told you there's a way to trade earnings that could potentially: • Minimize the impact of IV crush • Offer significant upside potential • Limit your risk exposure • Provide consistent results across various market conditions Sounds too good to be true? I thought so too, until I discovered these lesser-known strategies. But here's the thing: These aren't your typical "buy calls" or "sell puts" approaches. They're advanced techniques that require a bit of explanation and live demonstration to truly grasp their power. That's why I'm hosting an exclusive live Mini-Mastermind: "Crush Events." During this session, I'll unveil: • The exact setups I use to potentially profit from earnings volatility • How to structure trades that can thrive regardless of market direction • A unique approach that could turn earnings uncertainty into your advantage Warning: This isn't your average "get rich quick" webinar. I'll be diving deep into real, actionable strategies that have the potential to transform your earnings season trading. Ready to take your options trading to the next level? [Join me this Thursday at 12 PM ET.]( Spots are limited, and registration is absolutely free. Don't miss this opportunity to learn strategies that could revolutionize your approach to earnings season. [Click Here to Secure Your Spot]( Remember, in trading, knowledge isn't just power—it's profit potential. See you Thursday! To your success, Don Kaufman [tw]( [yt]( Update your email preferences or unsubscribe [here]( © 2024 Don Kaufman - TheoTrade PO Box 24790 Christiansted, Virgin Islands 00824, Virgin Islands, U.S. [Terms of Service](