Straddle Either for IV increase or Through Earnings

[tjlocke99]

Hello.

Has anyone ever tried purchasing straddles or strangles with expirations out 2 months or more (even out to near LEAPS time frame) and doing this around earnings time for very small gains with very limited theta decay. Alternatively holding these longer dated options through the earnings announcements?

Thanks.

[Marco]

You'll have very little theta but a long dated option won't have a big IV increase ahead of earnings (nor a big drop afterwards) and also won't be very sensitive to any moves in the stock (low gamma). So not much point buying it as a pre earnings play as Its not likely to go up in price due to IV increase or move in stock price. And you'll need quite a move to make some return if you hold it through earnings.

You'll have a lot less risk but also a lot less reward - I'm not sure whether the ratio is much better than on a monthly option.

But easy to compare a few of our current plays if you have TOS.

[tjlocke99]

Marco your analysis makes sense. I will backtest in TOS on what happens when holding through earnings. My only problem with testing like this that its based on the daily closing price and the day after earnings can have big swings.