How do people lose money on earnings play? via /r/wallstreetbets #stocks #wallstreetbets #investing

How do people lose money on earnings play?

I just saw a post saying it’s stupid to buy calls before earnings because of IV crush. This earnings season I made 17k profit off of 4k invested from a GOOGL $2840 2/11 call and a CMG $1550 2/25 call.

If you’re losing money on earnings play where you know a company will beat earnings, you’re seriously impatient and don’t know how to play high volatile market plays. Both of these calls I made sure had relatively low IV, the google call had an IV of around 40% and the CMG call had an IV of 60% (Ik this is relatively high but for earnings it’s actually pretty low).

The key to my strategy which has worked super well is having excellent timing with your options for earnings. The google call was bought at 3:55 pm and the chipotle call was bought at 3:45 pm. Why? My philosophy is I want to minimize the other Greeks impact on options prices so I can capture as much gains from the high change in delta from after hours movement. By buying right before market close the day that they report earnings, I’m reducing the risk of time decay (theta) impacting my calls or puts before the after hours movement. I always sell my calls the day after earnings report release at 9:30, regardless of gain or loss. This is because IV crush will always come the day after earnings, but if you sell at 9:30, IV is still high enough that you can capture most of the gains from the delta increase.

If you buy your calls/puts during the day of earnings planning to swing trade them after the after hours movement, you’re seriously retarded. You’re just letting your option lose value throughout the day, cause let’s be honest for earnings you want to buy week out or two week out options, due to theta. Sure, you can scalp a little extra profit if you buy at the low for the day, but it’s not worth the risk.

I swear if you follow this strategy of buying a two week out ATM or slightly OTM call at 3:55 and sell at 9:30, you can’t lose unless you pick the wrong direction.

The whole point of earnings is to capture the AH gains that change your option price enough that delta offsets the decrease in vega. By trading only for about 5 mins of market hours, you’re limiting theta’s effect on decreasing the gains from delta. I honestly don’t get how you retards can lose following this strategy. Shit I’ve made a third of my salary following this strategy.

TLDR: buy your options for earnings ATM or slightly OTM with a week or two for expiry and sell at 9:30 the next gain to always win if you get the right direction.

Don’t believe me? Buy Nvidia calls with 2 weeks expiry at 3:55 and sell at 9:30 and I guarantee you at least 50% gains.


Submitted February 14, 2022 at 02:19AM by cheesybib
via reddit