Market Amplifies Earnings Moves, Can a Strangle Make You Money?
This week marks the most volatile earnings week of the season. The market is punishing bad earnings and rewarding good ones—yesterday, some strong performers surged over 20%, while certain earnings misses dropped more than 20%.
Is this the perfect time to use a strangle strategy—betting on volatility instead of direction? But of course, if you get it wrong and the stock doesn’t move enough, you could lose money...
What is a Strangle?
Long Strangle: Buy one out-of-the-money call and one out-of-the-money put before earnings, betting on a big move in the stock price — either up or down. As long as the move is large enough, you can make money.
Short Strangle: Sell one call and one put, betting the stock won’t move much after earnings. The goal is to profit from time decay and the implied volatility (IV) crush.
Example 1: $Duolingo, Inc.(DUOL)$
📅 Day before earnings close: $315
Post-earnings surge: +13%, closing at $390 (up $75)
Pre-earnings position: Buy $340 Call + $290 Put
Assume premiums: Call $15 + Put $10 = Total cost: $25
Post-earnings outcome:
$340 Call becomes in-the-money, value = $390 - $340 = $50
$290 Put becomes worthless, value = $0
💰 Total value = $50 → Net profit = $50 - $25 = $25*100= $2500
DUOL’s earnings beat expectations significantly, and the stock spiked well past the breakeven point (around $340 + $25 = $365).
Buying a strangle clearly paid off.
Example 2: $NEBIUS(NBIS)$
Day before earnings close: $55
Post-earnings surge: +18%, closing at $65 (up $10)
Pre-earnings position: Buy $60 Call + $50 Put
Assume premiums: Call $5 + Put $4 = Total cost: $9
▶️ Post-earnings outcome:
$60 Call is in-the-money, value = $65 - $60 = $5
50 Put is worthless, value = $0
💰 Total value = $5 → Net loss = $5 - $9 = -$4 ❌ Loss
Even with an 18% gain, the stock didn’t break the breakeven point ($60 + $9 = $69). That’s likely because IV dropped sharply after earnings, reducing the value of the options.
The move wasn’t big enough = a loss.
So in this case, would a short strangle have worked better instead? After all, the post-earnings IV crush is very real.
Tips!
Stock selection: Focus on stocks with a history of big post-earnings moves — like DUOL, COIN, etc. Historical data shows average moves exceeding 10%.
Timing: Be extra cautious if implied volatility has already been driven up before earnings. If the premium is too expensive, the risk of loss when buying a strangle increases significantly.
What do you think:
Strangle During Earnings Season: Buy or Sell?
Which big-swing stocks would you try with strangle? (options carry risks, try it in demo account)
What’s the best earnings season strategy?
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与其依赖期权，我更喜欢直接交易正股。这样，我就不是在对抗时间衰减或IV变化——只是在对抗价格走势。如果一家公司超出预期并表现出强劲势头，我可以乘胜追击；如果令人失望，我可以做空或置身事外。它更简单，并且避免了期权中的盈亏平衡数学。
对于那些熟悉期权的人来说，扼杀可以在正确的股票和时机下发挥作用，但我坚持交易股票本身。财报季关乎速度、纪律和对数字的快速反应。
@Tiger_comments @TigerStars
Buy a strangle to profit from a large price swing, or sell one to profit from minimal movement and low volatility
This approach works best with high-volatility stocks like the Mag7 that have a history of big post-earnings moves
The best earnings season strategy depends on expected price movement and implied volatility。。。
Tag :
@Huat99
Alternatively, I would wait till the earnings is out to swing trade based on momentum and do bargain hunting that I intend to hold for the short or even long term. The best strategy is a strategy that one knows what one is doing and best fits if one has great knowledge of the stock and expected performance. @SR050321 @DiAngel @Success88 @SPOT_ON @Wayneqq @Kaixiang @Universe宇宙 @Fenger1188 @HelenJanet @LuckyPiggie come join
Call Option: You profit if the stock goes up.
Put Option: You profit if the stock goes down.
Strangle : You profit if the stock goes anywhere but sideways.
Here is the catch: Strangles cost money upfront to buy. If the stock's earnings barely move the needle, both your Call and Put Options could expire worthless.
So can Strangle make you money? Absolutely, only if the stock delivers fireworks. But if the stock barely splutters, you are out of luck.
Strangle is a great strategy for the bold and tactical trader. So yes it is thrilling but it is definitely not for the risk adverse investors like me.
@Tiger_comments @TigerStars @Tiger_SG @CaptainTiger @TigerClub
短扼杀：卖出一份看涨期权和一份看跌期权，押注该股在盈利后不会有太大变动。目标是从时间衰减和隐含波动率（IV）挤压中获利。