How to play earnings season with options (5): Can cross options do the same?

Another earnings season has begun, and options are most commonly used to bet on earnings. The first option to come into contact is probably to buy call or put unilaterally. After finding that the winning rate of unilateral gambling financial report is not big, some beginners will start to make cross options. There are two kinds of straddle and strangle.

To distinguish the difference, Straddle is often called saddle type, which refers to the combination of call and put with the same strike price and maturity date. The biggest advantage of this strategy is that it doesn't judge the direction and only gambles on the fluctuation, that is, it needs the fluctuation of positive stocks to be large enough so that the income of one side is greater than the cost of both sides. The risk is that the price of positive stocks fluctuates little and cannot offset the cost of purchasing two options.

Strangle is a cross option. The difference with Straddle is that it is a combination of call and put with different strike price but the same maturity date. When the price breaks through (whether it rises or falls below) a certain range, it can make a profit, which is also a bet on volatility. It is suitable for stocks with very large price fluctuations, typically growth stocks and technology stocks.

Cross-style is very common to be used to bet on financial reports, because it is a non-directional strategy, which can achieve good returns through stock price fluctuations. The most common scenario of large fluctuations is financial reports, such as what I read this week's financial reportsNetflix$(NFLX)$And$Taiwan Semiconductor Manufacturing(TSM)$There are a large number of cross-type large order transactions:As for cross-type transactions, the most I have seen are basically buying before the financial report and then selling after the financial report comes out.

But I want to give you another idea, which can also get good returns.

It is to buy straddle style about one week before the financial report, and then sell it 1-2 days before the financial report. This method is different from the common method of selling after getting the financial report, which is to sell before the financial report falls to the ground.

Mainly to earn the option income brought by the sharp rise in volatility a few days before the financial report is released. Usually, the implied volatility (IV) will rise sharply 3-7 days before the financial report is released, enter before this IV rises, and then make a profit when IV rises to a high value. For example, if the median value of IV of a company is 60%-70%, then buy call and put at this time, and stop the profit when IV has a high probability of 85%-90% before the financial report. Some options exceed 100% before the financial report.

Why am I doing this?

I often say that the option seller, but the cross-style is the buyer's strategy, call and put are both purchases, and the time of calling options is the biggest enemy. The option buyer has the loss of time value, and the loss of buying on both sides is great. Usually, cross-style is to make up for the loss of time value through the fluctuation of stock price. Theta, the Greek letter index of options, is the quantitative value of time value loss. Another Greek letter is Vega, which is used to measure the relationship between option price and expected volatility. If you want to learn about time consumption and expected fluctuations, you can use Vega and Theta to calculate them. But I don't think it is necessary to calculate this.

Simply put, the higher the IV, the higher the option price. Although the time loss is very large, the pushed-up IV can effectively offset the time value loss, and sometimes the price increase caused by IV greatly exceeds the time value loss, which often occurs in$Tesla Motors(TSLA)$On the option.

Why don't you get the financial report?

If there is no particularly big fluctuation in the overall financial report, then IV will plummet, especially the option IV with near expiration date will drop to close to 0, superimposing the loss of time value, and the loss of this bet financial report will be even greater. However, if there is no big jump in IV before the financial report and the stock price does not fluctuate, the losses will be more limited.

It also needs to be emphasized that if the stock price has started to jump high and IV has started one week before the financial report, it may not be of great significance to go in and do it. Trading is a probability game. When IV will soar, to what extent, and different triggers with different targets, it is necessary to judge the specific situation. Every financial report of each stock is not the same. This is just a method.

Interested friends can try with the simulation disk. I see Tiger promoting the simulation disk.

# 聊聊我的期权交易心得

Disclaimer: The above content represents only the personal views of the poster and does not constitute investment advice on this platform.

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  • 昶_1338
    ·19:35
    Ha ha
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  • 莫筱臻Rita
    ·01-17 10:50
    Learning
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  • 2020苏苏
    ·01-17 08:46
    [Smiles]
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  • free2talk
    ·01-17 07:10
    Learning
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  • Cattle
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  • 杨秀军
    ·01-14
    This idea is veryGood
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  • Good
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  • 潘缓缓
    ·01-14

    Learning

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  • This article is good, forward it to everyone
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  • I learned, thank you for sharing
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  • Do it
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  • NuyoahF
    ·01-13
    Good
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  • Is the winning rate high?
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  • [Strong]
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  • Learned

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  • 勇椒
    ·01-13
    This article is good, forward it to everyone
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  • Ha
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  • 2020苏苏
    ·01-13
    [Smiles]
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  • StockCurry
    ·01-13
    With the emergence of wallstreetBet, retail investors are getting crazier and crazier. If they don't work hard, they will take the yolo savings. The accuracy rate is getting lower and lower
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  • StockCurry
    ·01-13
    See the big order change, let me say two sentences. Now this big order change has been rotten. The big order change originally refers to the institution that is very optimistic about a stock that will rise or fall and then buy a large order. If the institution is very optimistic or not optimistic, it will only be one leg or call or put. Therefore, looking at the option big order change should pay attention to one leg, that is, pure call or Put shows that the combination is of little basic significance
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