Is selling options before earning Good Strategy?

C

Cam123

I know options are really expensive before earning. Also, I know stocks could have huge moving after earning.

However, some stocks never move too much after earning. For example-JNJ. you can check its earning history. The biggest earning moving is 2.4% in the past 5 years. And, its option are expensive. So, selling strangle is profitable or iron condor.

you can also find other stocks like JNJ. These stocks never move too much after earning, but their options are rich to sell, that is, I only pick stocks which never move too much after earning from past performance. I know past performance cannot guarantee the future, but Everyone use past performance to guess future in market.

any one can give me some suggestion?
thank you

 
I have remarked something with markets.
It's that likely events pay peanuts,
Unlikely events are impactful.
So it tends to balance.
Add commissions ...
You lose !!!

That's why one needs an edge.
It's either Anticipatory, information based.
Or you're dumb but Antifragile, payoff based.

IMHO.
What you have described ...
Falls in none of these two categories.
You still can backtest. Or try it yourself.

"Everyone use past performance to guess future in market"
It's a bold statement. Just need to find one guy ...
Only One ! that doesn't look back to refute your statement.
It's a less likely event than that of one of your company behaving badly,
But I'll easily find one =P By the way, History is only good as Priors,
No need to waste his time building a system based solely on that ...
 
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I once traded a long straddle on a stock that everyone thought would move maybe 5% after earnings. It ended up making a 20% move where I made a lot of money unexpectedly.
Now imagine the guy who took the other side of my trade. That's you.
 
stevegee58 said:
I once traded a long straddle on a stock that everyone thought would move maybe 5% after earnings. It ended up making a 20% move where I made a lot of money unexpectedly.
Now imagine the guy who took the other side of my trade. That's you.
More...

Since one off stories represent total strategies I sold vol in a name that everyone thought would move 15percent and it moved 5percent. Imagine the guy who took the other side of my trade. That's you.
 
 
Don't mess around with earnings season that basically happens only once in a blue moon.
You should instead have a steady thing and/or strategy that you regularly deploy. :);)

KISS: keep it simple, stupid
 
Sure it's a good strategy, but don't underestimate the risk!!

About 10 years ago when I first started trading volatility that was one of the first "easy" trades I saw. Well of course things that seem easy at first are not. I doubled my account in few months (first sign your going to get in trouble lol). Well of course I hit a trade (still remember it was VSEA) where it moved way out of the IV range the options were pricing and I was down 30% in one shot.

I still don't think it's a terrible idea. The key would be to trade a fixed amount of your capital on each earnings and NOT keep sacking up (which is did so that one trade wiped out almost all my gains). So if you have a 100k account do 10k per trade but don't increase it. That way if you do get a loser or two or three even in a row you won't blow up. Of course your returns won't be as good but I'd rather take 20% a year than do what I did and double my account in a few months just to see it get crushed.

I moved away from that method because at that time I had a full time job and my small account size and potential return using this strategy in a "safe" way did not justify me trying to do this full time.
 
Look at the tastytrade track record on that strategy. They have many winners but usually a single loser eats all their profits from that strategy and then some. Almost every earnings quarter they catch an outlier. The Goldman approach has very few winners but seems to be a better p&l play overall especially if you get lucky and catch a big outlier like linked in a couple quarters ago.
 
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