Top Earnings Options Plays for the Week (10/11 – 10/15)

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The Week Ahead

Next week is arguably the beginning of one of the most anticipated earnings seasons in market history.

The magic starts in earnest at the opening bell Wednesday when JPMorgan (JPM) and Delta Airlines announce their earnings. And more companies follow suit as the week progresses with Morgan Stanley (MS), Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), Goldman Sachs (GS), Walgreens Boots Alliance and a few notable others.

Here are 11 companies that I think could offer some interesting opportunities next week.

Below you will find the implied volatility (IV), 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.

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Here are a few other top earnings options plays for next week (10/11 to 10/15).

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Courtesy of Slope of Hope

Due to the uncertainty around earnings announcements, both speculators and hedgers create a huge demand for options around a company’s earnings announcement. This increase in demand for the options for that stock increases the implied volatility, which ultimately increases the price of the options.

Basically, options prices are inflated around earnings announcements, and as sellers of options our goal is to take advantage of these price discrepancies.

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 normally use short strangles or iron condors outside of the 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.

And don’t forget to sign up for my Free Weekly Newsletter for weekly education, research and trade ideas.

4 comments on “Top Earnings Options Plays for the Week (10/11 – 10/15)

  1. David Rosenfield on

    Andy,

    Nice speaking with you yesterday.

    Do you have articles in your archives where you have previously spelled out the significance of IV, IV rank and IV% relative to successful options investing? Is it possible to be referred to them? Or is this simply “options 101” and can be found anywhere?

    Reply
    • Andy Crowder on

      David,

      Yes, it was a pleasure. I would suggest starting with my reports. I will be adding a few posts in the near future on IV, IV rank, IV percentile and other associated topics. I hope this helps.

      Reply
  2. Rob Black on

    I found it a bit interesting that PGR showed up on the report of potential plays. PGR reported quarterly earnings, but they also report monthly financials. So the quarterly report really doesn’t carry much of a surprise with it. PGR generally isn’t heavily traded in the options market. That all being said, the IV was a bit higher than normal, which I find interesting. I did take a Oct 15 iron condor on PGR close to the strikes, and it is currently slightly profitable. Which followed the game plan for this stock. I just found it interesting that they didn’t fit the typical profile of a company that fits the earnings iron condor model.

    Reply
    • Andy Crowder on

      Rob,

      PGR was on due to liquidity. I was surprised it showed up on my screen, but that is what happens from time to time. typically, we just see the market stalwarts or near-term headline stocks with a pop in volume. Glad to hear you took the trade and it is profitable so far. Will be interested to hear how you fare at the end. Good luck!

      Reply

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