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Earning season is just around the corner and big bucks are made (or lost) around this time. Are you ready for the season? Check out the big name that are to announce around Jul expiration timing.
Here are couple of things that maybe helpful when you are developing a big picture:
- Implied volatility generally rises as we move closer to the announcement date. Need proof, check out this chart of Google-
- Stocks fill gap in either direction. Either they gap-up to close previous gap and break out or gap-down to break down. So running a risk/reward analysis pays-off.
- Higher the uncertainty, higher the IV and hence higher the movements. I have not done any statistical analysis on this (Please do share with me if you do or already have one). Stocks that has history of beating estimates are expected to beat. But the catch is, do they beat more than what they have been beating by? that’s what will drive stock crazy.
- A potential formula to win: Beat Revenue+Beat Earning+Raise Outlook on both earning and revenue. Any mixture will give mix results.
- The options will be very cheap closer to expiration as there will little time value left. So the better you are prepared, higher the chances of leverage.
Profitable trading and happy independence day, OptionPundit