Buy option strategy

[Pedro77]

Hi all,

I am starting with option trading and I'd like to ask you for your experience.
Is it a good idea to buy call/put options immediately after the company earnings report?

Let's say company ABC has stock value 100 USD. After positive earnings report,
stocks jump to amount 105 USD.

Does it make sense to buy the option for this stock next day with expectation that the value will continue to grow? Or am I completely wrong because the market has already changed the value of this stock and therefore further value increase is only speculation? I would like to concentrate on buying options and I am looking where I could start.

Thank you very much.

 

[OTM-Options]

Does it make sense to buy the option for this stock next day with expectation that the value will continue to grow?

Yes ...... But I would stick with Calls even if the stock drops slightly after earnings. We are in a bull market that has sort of stalled this past 3 months, the last earnings didn't do much for the markets.

Perhaps buy at 10:00 AM EST the day after earnings. Maximum 3 to 4 weeks to expiry.

 

[OddTrader]

Hi all,

I am starting with option trading and I'd like to ask you for your experience.
Is it a good idea to buy call/put options immediately after the company earnings report?

Let's say company ABC has stock value 100 USD. After positive earnings report,
stocks jump to amount 105 USD.

Does it make sense to buy the option for this stock next day with expectation that the value will continue to grow? Or am I completely wrong because the market has already changed the value of this stock and therefore further value increase is only speculation? I would like to concentrate on buying options and I am looking where I could start.

Thank you very much.

Doubtful! Read Caplan.

 

[TheDowJones]

Though buying calls/puts are usually the first place option traders usually start I don't think there are a very good trade. When you buy a option you are buying volatility also, so the price of underlying stock could increase and the price of your option could decrease due to volatility and/or time decay.

I would recommend a bull call spread if you are bullish on an underlying.

 

[naija]

Deciding to buy a call or put after earnings should be dependent on the underlying equity's fundamentals. You have to understand the business model and value of the equity in question. From there, you should be able to make an educated decision on if its worth entering a long call or put.

If you are trying to trade earnings, the best thing to do is identify credit spreads you can trade, where the options of the equity being traded have a high Implied Volatility (IV) before earnings are released. You want to take advantage of high IV because after earnings the premium of the calls and puts declines.