Modelling earnings moves.

[newwurldmn]

Read the paper a few times, the math is beyond my ability but the concept is simple enough. I now understand the relationships between IV and earning uncertainty from a probability and option pricing model points of view.

As a trader of options, for each underlying, I need to calculate the historical behaviors of prior earning periods, use them to predict the pricing outcome for the upcoming period and find those potentially under/over price options to trade. For a retail like me, to do that, I need access to historical IV, earning performance and modeling software. I have none of those.

On the other hand, perhaps I don't need to be so precise. Worth thinking about it some more.

Welcome any coaching or comments.

Given your general negativity about being a retail trader, perhaps you should stop trading.

Every post you make is about how you don’t have the advantages of other traders.

 

[ironchef]

Given your general negativity about being a retail trader, perhaps you should stop trading.

Every post you make is about how you don’t have the advantages of other traders.

I am generally pessimistic about my chances. I just don't have all the tools you professionals have. That is a fact.

What I don't understand is why I am profitable all these years given my disadvantage and I am here looking for answers.

 

[El OchoCinco]

What I don't understand is why I am profitable all these years given my disadvantage and I am here looking for answers.

What you are not taking into account is you are buying calls on stocks in a bull market so you might be mistaking simply being long in a bull market with specific trading skill.

Also a good option broker has all the tools available.

 

[newwurldmn]

I am generally pessimistic about my chances. I just don't have all the tools you professionals have. That is a fact.

What I don't understand is why I am profitable all these years given my disadvantage and I am here looking for answers.

Then stop being pessimistic or stop trading.

You don’t get anywhere in life focusing on what you don’t have.

 

[ironchef]

What you are not taking into account is you are buying calls on stocks in a bull market so you might be mistaking simply being long in a bull market with specific trading skill.

Also a good option broker has all the tools available.

Actually I figured that out some time ago. You are right, I use options as leverage, taking more risks, the classic CAPM approach and if there is no bears around, I will do a lot better than the underlying in absolute returns. I tried to learn other techniques, going non directional but so far the outcome is not good. As TheBigShort pointed it out, it takes a lot more math, info, understanding ... to do well if you try using real skills to trade.

The tools of brokers are not good enough to do non directional.

 

[ironchef]

Then stop being pessimistic or stop trading.

You don’t get anywhere in life focusing on what you don’t have.

1. Everyone says 90%-99% of retails are not profitable, so hard not to be pessimistic.

2. Just a different approach in life. By focusing on what I don't have I hope to fix my weakness and be better at it.

But thanks.

 

[El OchoCinco]

The tools of brokers are not good enough to do non directional.

Thinkorswim has more than adequate tools and I have been using them for years. In their analyzer I can see the position and greeks as well as make adjustments. I used them t model vols post earnings in my earnings calendars/straddles and dest uses those tools as well.

"Non-directional" is a word thrown around but if you are talking about vol trades, then ToS has good enough tools for retail traders. You are not trying to replicate complex instutiotnal model portfolios..just make some money.

 

[El OchoCinco]

1. Everyone says 90%-99% of retails are not profitable, so hard not to be pessimistic..

I became successful in life by NOT listening to everyone. Those who fail talk the most and the loudest since they have to cover their own weaknesses rather than trying to learn and improve. Successful traders realize the work that went into it and are quiet and just chug along.

There is no everyone, them, or experts with any real facts, just failures trying to cover up their own mistakes with misdirected blame. Retailers can be profitable, it is a proven fact.

Forget what % of them could be profitable and just work to be one of them.

You will do a lot better when you stop listening to "them" (the collective group of failures who cannot hack it and want to make sure no one else can) and simply put the work in and try.

 

[TrustyJules]

Look there are a lot of people on here dubbed noobs or berated for just being lucky they are directional in a bull market. However no matter how much of a numpty people on here are you have no idea what the average option buyer is like. They are far worse and know nothing about anything and are pure gamblers - the house is of course generally the winner.

 

[pipeguy]

Well from reading a few of your posts it looks like you trade linear products. That is why you see no use of this paper.

Brief glance at the paper tells me extensive knowledge of stochastic processes theory is needed to understand that. I'm currently studying it it during my 4 year in the university