Market Measures

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Trading Around Earnings

Market Measures

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During earnings season, we generally have an expansion in volatility in individual stocks making way for good trading opportunity.

Typically, we use the closest expiration to place an earnings trade. What happens if we sell further out?

Study:

  • AMZN, JPM, IBM
  • 2013 - Present
  • Sold 16 delta Strangles
  • Weekly Expirations
  • Front Week, 2 Weeks, 3 Weeks
  • Sold the Day Before Earnings
  • Covered the Day After
  • Recorded Average P/L, Standard Deviation (Risk)

For these underlyings, it seems that adding duration slightly improves the Average P/L while lowering the Standard Deviation.

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