Facebook Inc (NASDAQ:FB) Earnings
We can test this approach without bias with a custom option back-test. Here is our earnings set-up:
* Open the short iron condor two calendar days after earnings
* Close the iron condor 7 calendar days after earnings
* Use the options closest to 7 days from expiration (but at least 7-days).
And a note before we see the results: This is a straight down the middle volatility bet -- this trade wins if the stock is not volatile the week following earnings and it will stand to lose if the stock is volatile.
If we sold this 40/20 delta iron condor in Facebook Inc (NASDAQ:FB) over the last three-years but only held it after earnings we get these results:
40 Delta / 20 Delta
|Wins: 8||Losses: 4|
We see a 49.5% return, testing this over the last 12 earnings dates in Facebook Inc. That's a total of just 60 days (5 days for each earnings date, over 12 earnings dates).
We can also see that this strategy hasn't been a winner all the time, rather it has won 8 times and lost 4 times, for a 67% win-rate.
While this strategy had an overall return of 49.5%, the trade details keep us in bounds with expectations:
➡ The average percent return per trade was 7.78% over 5-days.
This is it -- this is how people profit from the option market -- it's not about guessing; ever.
We hope, if nothing else, you have learned about Facebook Inc (NASDAQ:FB) and the intelligence and methodology of option trading and this idea of equilibrium right after earnings.
To see how to find the best strategy for any stock we welcome you to watch this quick demonstration video:
Tap Here to See the Tools at Work
Thanks for reading.
You should read the Characteristics and Risks of Standardized Options.
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