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Our long term members know that we like to use few non-directional strategies to play earnings. There are few things we like about those strategies: They are predictable. They are repeatable. They are flexible. They can be used on the same stocks cycle after cycle. The following article described few stocks that we use over and over again, cycle after cycle. We said "$TSLA, $LNKD, $NFLX, $GOOG: Thank You, See You Next Cycle".Well, the Next Cycle is already here. Click here to view the article

The following article described few stocks that we use over and over again, cycle after cycle. We said "$TSLA, $LNKD, $NFLX, $GOOG: Thank You, See You Next Cycle". Well, the Next Cycle is already here. NFLX is one of those stocks. Here are our results from NFLX in the recent cycles: +10%, +20%, +30%, +16%, +30%, +32%, +18% Another earnings cycle has arrived, and NFLX delivered another nice winner for us. We opened a pre-earnings calendar at average price of $3.50 and exited at average price of $4.55, booking a 30% gain in the process. That marks eighth consecutive NFLX winner in the last few cycles. But some of our members did even better. Here is a screenshot from the forum: This member booked 47% gain! Here is another one: And one more: Those are real fills from real members. Not hypothetical returns. REAL RETURNS FROM REAL TRADERS. Those returns are even more remarkable when you consider the fact that the stock moved 15%+ in the last few days. We played it non-directionally, so we didn't really care which direction it will move, but booking 30-50% gains on a non-directional strategy after such a move is truly amazing. Earnings season is just starting. We are planning to play GOOG, FFIV, CMG, FB, AMZN, MSFT, BABA, LNKD, TSLA and more. Each stock has its own "character", the best time to enter and its unique setup. We already booked 57.6% ROI since the beginning of 2015. We can help you. If you want to learn those profitable options strategies: Start Your Free Trial

Our long term followers know that buying premium into earnings is one of our favorite strategies. I wrote about the strategy in my Seeking Alpha article Exploiting Earnings Associated Rising Volatility. IV (Implied Volatility) usually increases sharply a few days before earnings, and the increase should compensate for the negative theta. We have been using this strategy in our SteadyOptions model portfolio with great success. However, not all stocks are suitable for that strategy. Some stocks experience consistent pattern of losses when buying premium before earnings. For those stocks we are using some alternative strategies like calendars. Click here to view the article

However, not all stocks are suitable for that strategy. Some stocks experience consistent pattern of losses when buying premium before earnings. For those stocks we are using some alternative strategies like calendars. In one of my previous articles I described a study done by tastytrade, claiming that buying premium before earnings does not work. Let's leave aside the fact that the study was severely flawed and skewed by buying "future ATM straddle" which simply doesn't make sense (see the article for full details). Today I want to talk about the stocks they used in the study: TSLA, LNKD, NFLX, AAPL, GOOG. Those stocks are among the worst candidates for a straddle option strategy. In fact, they are so bad that they became our best candidates for a calendar spread strategy (which is basically the opposite of a straddle strategy). Here are our results from trading those stocks in the recent cycles: TSLA: +28%, +31%, +37%, +26%, +26%, +23% LNKD: +30%, +5%, +40%, +33% NFLX: +10%, +20%, +30%, +16%, +30%, +32%, +18% GOOG: +33%, +33%, +50%, -7%, +26% You read this right: 21 winners, only one small loser. This cycle was no exception: all four trades were winners, with average gain of 25.2%. I'm not sure if tastytrade used those stocks on purpose to reach the conclusion they wanted to reach, but the fact remains. To do a reliable study, it is not enough to take a random list of stocks and reach a conclusion that a strategy doesn't work. At SteadyOptions we spend hundreds of hours of backtesting to find the best parameters for our trades: Which strategy is suitable for which stocks? When is the optimal time to enter? How to manage the position? When to take profits? The results speak for themselves. We booked 147% ROI in 2014 and 32% ROI so far in 2015. All results are based on real trades, not some kind of hypothetical or backtested random study. Related Articles: How We Trade Straddle Option Strategy How We Trade Calendar Spreads Buying Premium Prior to Earnings Can We Profit From Volatility Expansion into Earnings Long Straddle: A Guaranteed Win? Why We Sell Our Straddles Before Earnings The Less Risky Way To Trade TSLA If you want to learn more how to use our profitable strategies and increase your odds: Start Your Free Trial

In one of my previous articles I described a study done by tastytrade, claiming that buying premium before earnings does not work. The title of the study was "We Put The Nail In The Coffin On "Buying Premium Prior To Earnings". ​I demonstrated that their study was highly flawed, for several reasons (strikes selection, stocks selection, timing etc.) It seems that they did now another study, claiming to get similar results. Click here to view the article

The study was done today - here is the link. The parameters of the study: Use AAPL and GMCR as underlying. Buy a ATM straddle option 20 days before earnings. Sell it just before the announcement. The results of the study, based on 48 cycles (2009-2014) AAPL P/L: -$2933 GMCR P/L: -$2070 Based on those results, they declared (once again) that buying a straddle before earnings is a losing strategy. What's wrong with this study? Dismissing the whole strategy based on two stocks is completely wrong. You could say that this strategy does not work for those two stocks. This would be a correct statement. Indeed, we do not use those two stocks for our straddles strategy. From our experience, entering 20 days before earnings is usually not the best time. On average, the ideal time to enter is around 5-10 days before earnings. This when the stocks experience the largest IV spike. But it is also different from stock to stock. The study does not account for gamma scalping. Which means that if the stock moves, you can adjust the strikes of the straddle or buy/sell stock against it. Many times the stock would move back and forward from the strike, allowing you to adjust several times. In addition, the study is probably based on end of day prices, and from our experience, the end of day price on the last day is usually near the day lows, and you have a chance to sell at higher prices earlier. The study completely ignores the straddle prices. We always look at prices before entering and compare them to previous cycles. Entering the right stocks at the right time at the right prices is what gives this strategy an edge. Not selecting random stocks, random timing and ignoring the prices. As a side note, presenting the results as dollar P/L on one contract trade is meaningless. GMCR is trading around $150 today, and pre-earnings straddle options cost is around $1,500. In 2009, the stock was around $30, and pre-earnings straddle cost was around $500. Would you agree that 10% gain (or loss) on $1,500 trade is different than 10% gain (or loss) on $500 trade? The only thing that matters is percentage P/L, not dollar P/L. Presenting dollar P/L could potentially severely skew the study. For example, what if most of the winners were when the stock was at $30-50 but most of the losers when the stock was around $100-150? Tom Sosnoff and Tony Battista conclude the "study" by saying that "if anybody tells you that you should be buying volatility into earnings, they really haven't done their homework. It really doesn't work". At SteadyOptions, buying pre-earnings straddle options is one of our key strategies. Check out our performance page for full results. As you can see from our results, the strategy works very well for us. We don't do studies, we do live trading, and our results are based on hundreds real trades. Of course the devil is in the details. There are many moving parts to this strategy: When to enter? Which stocks to use? How to manage the position? When to take profits? And much more. So we will let tastytrade to do their "studies", and we will continue trading the strategy and make money from it. After all, as one of our members said, someone has to be on the other side of our trades. Actually, I would like to thank tastytrade for continuing providing us fresh supply of sellers for our strategy! If you want to learn more how to use it (and many other profitable strategies): Start Your Free Trial Related Articles: How We Trade Straddle Option Strategy Long Straddle: A Guaranteed Win? Why We Sell Our Straddles Before Earnings Long Straddle: A Guaranteed Win? How We Made 23% On QIHU Straddle In 4 Hours

Here is how their methodology works: In theory, if you knew exactly what price a stock would be immediately before earnings, you could purchase the corresponding straddle a number of days beforehand. To test this, we looked at the past 4 earnings cycles in 5 different stocks. We recorded the closing price of each stock immediately before the earnings announcement. We then went back 14 days and purchased the straddle using the strikes recorded on the close prior to earnings. We closed those positions immediately before earnings were to be reported. Study Parameters: TSLA, LNKD, NFLX, AAPL, GOOG Past 4 earnings cycles 14 days prior to earnings - purchased future ATM straddle Sold positions on the close before earnings The results: Future ATM straddle produced average ROC of -19%. As an example: In the previous cycle, TSLA was trading around $219 two weeks before earnings. The stock closed around $201 a day before earnings. According to tastytrade methodology, they would buy the 200 straddle 2 weeks before earnings. They claim that this is the best case scenario for buying pre-earnings straddles. My Rebuttal Wait a minute.. This is a straddle, not a calendar. For a calendar, the stock has to trade as close to the strike as possible to realize the maximum gain. For a straddle, it's exactly the opposite: When you buy a straddle, you want the stock to move away from your strike, not towards the strike. You LOSE the maximum amount of money if the stock moves to the strike. In case of TSLA, if you wanted to trade pre-earnings straddle 2 weeks before earnings when the stock was at $219, you would purchase the 220 straddle, not 200 straddle. If you do that, you start delta neutral and have some gamma gains when the stock moves to $200. But if you start with 200 straddle, your initial setup is delta positive, while you know that the stock will move against you. It still does not guarantee that the straddle will be profitable. You need to select the best timing (usually 5-7 days, not 14 days) and select the stocks carefully (some stocks are better candidates than others). But using tastytrade methodology would GUARANTEE that the strategy will lose money 90% of the time. It almost feels like they deliberately used those parameters to reach the conclusion they wanted. As a side note, the five stocks they selected for the study are among the worst possible candidates for this strategy. It almost feels like they selected the worst possible parameters in terms of strike, timing and stocks, in order to reach the conclusion they wanted to reach. At SteadyOptions, buying pre-earnings straddles is one of our key strategies. It works very well for us. Check out our performance page for full results. As you can see from our results, "Buying Premium Prior To Earnings" is still alive and kicking. Not exactly "Nail In The Coffin". Comment: the segment has been removed from tastytrade website, which shows that they realized how absurd it was. We linked to the YouTube video which is still there. Of course the devil is in the details. There are many moving parts to this strategy: When to enter? Which stocks to use? How to manage the position? When to take profits? And much more. But overall, this strategy has been working very well for us. If you want to learn more how to use it (and many other profitable strategies): Subscribe to SteadyOptions now and experience the full power of options trading at your fingertips. Click the button below to get started! Join SteadyOptions Now! Related Articles: How We Trade Straddle Option Strategy Can We Profit From Volatility Expansion into Earnings Long Straddle: A Guaranteed Win? Why We Sell Our Straddles Before Earnings Long Straddle: A Guaranteed Win? How We Made 23% On QIHU Straddle In 4 Hours

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.

Hello again. If I am looking for good post-earnings analysis right after the company makes its earning announcement then what site(s) do you think are the best. Perhaps flyonthewall, http://www.theflyonthewall.com/splashPage.php?action=main&arg=A Is it enough that if a company misses its earnings forecast then the stock will go down? Look at FNSR today. The stock went up despite missing earnings forecasts.

As I write this I am pretty sure I already know the answer, but I was wondering if anyone has tried to this based on indicators like volume, OI, IV increase on just the Put or Call side, etc., and if they had any success? I know the IV crash would be a major issue with being directional anyway, but regardless knowing if anyone had any success in this area could be helpful. Thanks.

Could some of the senior members and/or Kim comment on this idea? Does the IV (when it moves at all) on weeklies always outpace or at least stay even with the monthlies on the earnings trades? Could you then do the opposite of a calendar and long the weeklies and short the monthlies on an earnings trade? Take this hypothetical example: AAPL underlying @ 615 let's say its 19 July and the 27 July AAPL weekly is released. Let's say we have this made up pricing: 1. 27 July AAPL 615 Call @ $10.00 2. 27 July AAPL 615 Put @ $10.00 3. 17 Aug AAPL 615 Call @ $20.00 4. 17 Aug AAPL 615 Put @ $20.00 You would do this: long qty 2 of #1 long qty 2 of #2 (creating a straddle) short qty 1 of #3 short qty 1 of #4 I am sure the theta will kill you if you don't get an IV increase, so do this on a stock like AAPL probably would not work because of the high stock price (unless your portfolio is huge). Any thoughts on a trade that could take advantage of the greater IV increase in the weeklies? Thanks!