Options Jive

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Guide for Trading Earnings

Options Jive

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Forty percent of stocks in the S&P 500 will release their earnings this week. How can we take advantage of this increase in volatility? Which option expiration should we choose?

The Research Team creates a table that compares Weekly Expirations to Monthly Expirations -- one isn't better than the other since there are tradeoffs involved with each.

For example:

Weekly Expirations

  • High possible ROC
  • The overall possible p/l is smaller; the daily P/L though is larger
  • Large moves in the stock require quick management

Monthly Expiration

  • Lower possible ROC
  • The overall possible profit is larger; the daily P/L is lower
  • Large moves in the stock require less of a “hyperactive approach”

A final table then shows a comparison of strategies along with their approximate probabilities of success.

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