Here are the top earnings options plays for next week (8/2 to 8/6).
Courtesy of Slope of Hope
Of the 80 stocks above, I’ve chosen to highlight ten stocks, with highly liquid options in the table below.
As I stated last week and will every week during earnings season, my hope is that, by going through the process, you will get the hang of how to use both defined and risk-defined strategies around earnings announcements. I’m certainly not saying that the ten 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.
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 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’ve added two columns for the prices of an iron condor and strangle at approximately 80%. Approximate is the key here. Moreover, the strike width default for an 80% iron condor is 5 strikes wide, unless stated otherwise. Knowing the price of both will give you an idea regarding the potential return and give you some insight into how much premium you would receive if you chose another strategy, particularly a more directional play using bear call spreads or bull put spreads.
Just remember, the following is for educational purposes only.
Here are some of the highlights for this week. 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.
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, 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.
As always, if you have any questions, please feel free to email me or post your question in the comments section below.Options