*The options earnings plays are updated weekly during earnings season.
The Week Ahead
We are heading towards the final weeks of earnings season. That being said, there are several opportunities next week.
I’ve chosen eleven stocks that I will be focusing on this week.
- JD.com (JD)
- Riot (RIOT)
- Medtronic (MDT)
- Best Buy (BBY)
- Toll Brothers (TOL)
- Dick’s Sporting Goods (DKS)
- com (CRM)
- Ulta Beauty (ULTA)
- Peloton (PTON)
- HP inc. (HPQ)
- Marvell Tech. (MRVL)
- Gap Inc. (GPS)
I’ve chosen to highlight eleven highly liquid stocks, with highly liquid options in the table below this week.
My hope is that, by going through the process, you will get the hang of how to use both defined and risk-defined options strategies around earnings announcements. I’m certainly not saying that the eleven stocks chosen will offer the most profitable trades, no one has a crystal ball. But you will have the opportunity to learn how to use some incredibly powerful options strategies in an accelerated environment – earnings season.
As we know, due to the uncertainty around earnings announcements, both speculators and hedgers create a huge demand for options around earnings. This increase in demand increases the implied volatility, which ultimately increases the price of the options in the underlying stock that is due to announce. Basically, options prices are inflated around earnings announcements and as sellers of options our goal is to always take advantage of the price discrepancies seen around earnings.
Below you will find the implied volatility, IV rank, IV percentile, average past price movements around earnings, expected move (implied move) and a few other key items to help you with any potential trades.
I use the following list as a guide for any potential earnings season trades. If you have any questions on the information provided below don’t hesitate to email me or ask in the comment section below. And don’t forget to sign-up for my Free Weekly Newsletter for weekly education, research and trade ideas.
Here are the top options earnings plays for the week.
Here are several other options earnings plays plays for next week (8/23 to 8/27).
Courtesy of Slope of Hope
We can always create a trade with a nice probability of success using a variety of options selling strategies. At the top of the food chain would be the undefined risk options strategy known as the short strangle. Of course, if you wish to use a risk-defined trade, check out the price of an iron condor at various strike widths. I use short strangles and iron condors, outside of expected move and with a probability of success typically above 80%.
The reason I go outside of the expected move or range is because we know, through extensive research, that 80% of stocks trade within their expected move immediately following earnings
Again, if you have any questions, please feel free to email me or post your question in the comments section below.