Earnings play: Short call calendar spread

[candeo]

I was looking at this strategy for earnings: long one call and short more distant call. This way you could profit from a big move either way, but, and it is what matters, from an IV crush. Could be a good play for these very volatile plays, and could be adapted into a diagonal depending on your bias.
Anyone has tested this?

 

[Pa(b)st Prime]

Quote from candeo:

I was looking at this strategy for earnings: long one call and short more distant call. This way you could profit from a big move either way, but, and it is what matters, from an IV crush. Could be a good play for these very volatile plays, and could be adapted into a diagonal depending on your bias.
Anyone has tested this?

Ironic thread. In the past couple of days I've been constructing some calendars with the same thing in mind. Hopefully Mav or Risk can pipe in......

 

[candeo]

I was looking at NTRI for a play tonight. IV is very high and could drop significantly.

 

[spindr0]

Quote from candeo:

I was looking at this strategy for earnings: long one call and short more distant call. This way you could profit from a big move either way, but, and it is what matters, from an IV crush. Could be a good play for these very volatile plays, and could be adapted into a diagonal depending on your bias.
Anyone has tested this?

You need a big move for this to work. The IV crush is usually not enough. And it's a strategy for close to expiration. Look for IV Trader's topic about this.

 

[spindr0]

Quote from Pa(b)st Prime:

Ironic thread. In the past couple of days I've been constructing some calendars with the same thing in mind. Hopefully Mav or Risk can pipe in......

You want the far month to be inflated above historical as well, otherwise there isn't a lot of profit potential. A key component is your guesstimation of where the post release IV is going to contract to.

Bloated issues like NTRI are good candidates. I did a double ratioed reverse calndar one strike apart, eg. Feb/Mar 40p and 45c with more short Mar p's and Mar c's than short Feb's. Worked out fine. You have to be really selective and you have to be disciplined because in a fast market (like NTRI), price changes quickly.