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Earnings Strangles with Duration

Market Measures

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When trading earnings, we will normally look to place our trades in the shortest dated expiration cycle. While this is where we see the largest amount of volatility contraction, there is usually no time to adjust the trade if we are wrong. Knowing this, is there any value in placing a trade in a longer dated expiration?

Today, Tom Sosnoff and Tony Battista compare selling a strangle using the shortest weekly cycle to selling a strangle using the next monthly cycle. The guys look to close both trades the day after the earnings announcement. Additionally, the look at the results of managing the longer trade at 50% of max profit or taking it to expiration if they were unable to manage it for a winner. After all is said and done, they find out that the most successful and most profitable trades were those that used the shorter cycle!

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