Timing a non-directional earnings play

OptionsOptionsOptions said:
Since you want to take advantage of the option IV crush due to earnings the best time to enter is just before earnings at market close - around 3:30pm EST. In your case that would be today.

Your option selections depends on the price of the underlining and your expected move after earnings.
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Roger that. Any thoughts on a slick exit? I'll likely cut out if I can first thing in AM, but may need to wait till dust settles...

-Kev
 
This answer is probably too late, but we did a discussion of this on the forum. Next time consider selling the front vertical and buying the back vertical. The play is simply vol. crush and not very directional. Search the archives for the discussion - the one criticism from the discussion was it was more of a MM trade as opposed to retail. Exit the next day or soon after.
 
ajacobson said:
This answer is probably too late, but we did a discussion of this on the forum. Next time consider selling the front vertical and buying the back vertical. The play is simply vol. crush and not very directional. Search the archives for the discussion - the one criticism from the discussion was it was more of a MM trade as opposed to retail. Exit the next day or soon after.
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  1. No sense in buying the more costly further out to expiry options as protection/insurance.
  2. Buy the cheaper options with the same expiry as the short options.
  3. If the long options remain OTM after earnings then you should have a winner.
 
I used to trade a lot of earnings announcements. In general, I found that the highest IV was earlier in the day before the EA. What I looked for was a set up where the back week options had not inflated as sharply as the front week and I diagonalized the IC. Sometimes I even ratioed it as well, buying slightly more long than short. The reasons for this are that (1) there was usually salvage value in the far week, (2) if the underlying breached a short strike, having the far week offered the opportunity to adjust the position into a vertical, taking more premium in, reducing the loss and (3) if the underlying zoomed or collapsed, the extra few long legs could turn a loser into a winner. I don't do much of this anymore since it's an awful lot of digging (getting EA dates and modeling a lot of positions).
 
spindr0 said:
I used to trade a lot of earnings announcements. In general, I found that the highest IV was earlier in the day before the EA. What I looked for was a set up where the back week options had not inflated as sharply as the front week and I diagonalized the IC. Sometimes I even ratioed it as well, buying slightly more long than short. The reasons for this are that (1) there was usually salvage value in the far week, (2) if the underlying breached a short strike, having the far week offered the opportunity to adjust the position into a vertical, taking more premium in, reducing the loss and (3) if the underlying zoomed or collapsed, the extra few long legs could turn a loser into a winner. I don't do much of this anymore since it's an awful lot of digging (getting EA dates and modeling a lot of positions).
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Understood. I wonder how to approach my entry when the earnings are announced after the close of earnings, as I believe ADBE will be on the 15th. Mid-day entry and exit the following AM after open? This is less clear.

-Kev
 
kevagonia said:
Understood. I wonder how to approach my entry when the earnings are announced after the close of earnings, as I believe ADBE will be on the 15th. Mid-day entry and exit the following AM after open? This is less clear.

-Kev
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  • ADBE
  • Earnings Thursday, March 15 - After Hours.
  • Enter at about 3:30pm EST on Thursday, March 15.
  • Go with the March 16 options.
  • Exit March 16, sometime in the morning.
 
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