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Earnings Volatility

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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Tom and Tony show how much volatility premium is built into the price of options before earnings, and how much the option decreases in value the day after earnings.

The volatility crush from earnings is substantial and usually wipes out around two-thirds of at-the-money Straddle premium, in the case of MSFT.

What we will find out soon is how often this volatility crush is overshadowed moves in the underlying. Rememeber, nothing is free, and the volatility crush comes at an expense of large moves in the underlying.

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