Calendar Spread For Earnings

Hey there i need some clarification on double calender spreads leading into earnings.

Calendar spread for earnings. Comparing calendar and diagonal spreads in an earnings play. There was one calendar spread at the 105 strike and all the others were diagonal spreads. This is often part of our strategy just before announcement day.

One of the most useful characteristics of options is their ability to control risk and achieve a high probability of success when trading impending earnings announcements. In this scenario the premium from that short option bleeds off and funnels straight into the trader s wallet. Long calendar spreads are designed to hedge for volatility risk especially to navigate earnings season or other corporate news events that can poke a stock into action.

Calendar spreads perform optimally when the underlying hovers close to or right on the strike of the near month short option. After the huge run up from 140 to 260 and getting some technical sell signals we were pretty sure this stock would pull back. Google goog will announce third quarter earnings after the market closes on thursday.

Using last friday s closing option prices below are the risk profile graphs for broadcom avgo for options that will expire friday december 9 the day after earnings are announced. 1 is it best to open the calender spread at the height of iv or as early as possible. In the united states this occurs every quarter and it is always a busy time in the market there are many ways to trade earnings with options but in my opinion the best pre earnings option strategy is the diagonal call spread.

Moreover if the underlying makes a big unexpected move in either direction the most a debit calendar spread trader can lose is the amount of premium paid to establish the position meaning the debit calendar spread is a defined risk position. A calendar spread is an options or futures spread established by simultaneously entering a long and short position on the same underlying asset at the same strike price but with different delivery. Earnings are when a publicly traded company announces their financial results for a set period of time.

We owned 2 more calls than we were short. Implied volatility for the 9dec16 series is 68 compared to 35 for the 13jan17 series we selected. Tsla put debit spread closing trade.