Market Measures

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Earnings | Directional Play

Market Measures

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When you are looking to place a bullish assumption on an underlying for earnings, is it better to finance a long call spread with a short put or a short call. Each position has its benefits and its drawbacks but is one better than the other?

Today, Tom Sosnoff is joined by Tom "TP" Preston as they look at a study around this idea. The guys compare a Sunny Side Up (Long call spread, short 84% OTM call) to a Super Bull (Long call spread, short 84% OTM put). The guys find out that due to the recent bull market, the super bull proved to be the more profitable strategy. However, it is important to note that you can not mechanically place a directional trade like this. Instead it is important to wait and make sure all of the criteria for the trade is met!

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