Scanner Strategy Details

Pre-earnings Long Calls

IDEA: The idea is to try to take advantage of a pattern in short-term bullishness just before earnings, and then get out of the way so no actual earnings risk is taken.

That is, totally independent of whether the stocks have a pattern of beating earnings, in the two-weeks to few days before earnings, there is a group that have risen sharply ahead of the actual news. It's essentially bullish optimism in a very short-term window.

The scanner examines 14-, 7- and 3-days before earnings backtests.

WHEN IT WON'T WORK: This trade will likely show losses if the stock price does not rise into earnings, or if it drops. This is in fact a straight down the middle bullish bet -- this absolutely takes on directional stock risk.

Here is a full blown dossier using Nvidia as an example: Trading Earnings Optimism and Momentum With Options in NVIDIA Corporation

Pre-earnings Long Calls With Technical Safety Valves

IDEA: The idea is identical to the one above, but it has a techncial safety valve (a requirement for the moving averages) that tries to avoid the times when a stock is in a down trend. Once that risk is limited, we do the same -- try to take advantage of a pattern in short-term bullishness just before earnings, and then get out of the way so no actual earnings risk is taken.

The scanner examines 14-, 7- and 3-days before earnings backtests.

WHEN IT WON'T WORK: This trade will likely show losses if the stock price does not rise into earnings, or if it drops. This is in fact a straight down the middle bullish bet -- this absolutely takes on directional stock risk.

Here is a full blown dossier using Facebook as an example: The Bullish Technical Trigger in Facebook

Pre-earnings Long Straddle

IDEA: We can explore option trading opportunities that do not rely on stock direction.

What a trader wants to do is to see the results of buying an at the money straddle a few days before earnings, and then sell that straddle just before earnings. The goal is to benefit from a unique and very short time frame when the stock might move 'a lot', either due to earnings anxiety (stock drops before earnings) or earnings optimism (stock rises before earnings), but taking no actual earnings risk.

The scanner examines 14-, 6-days before earnings backtests.

WHEN IT WON'T WORK: This trade will likely show losses if the underlying stock does not move much before earnings or if the implied volatility does not rise enough to offset the time decay from being long options.

Here is a full blown dossier using Kroger as an example: Option Trading Without Stock Risk Before Earnings in Kroger Company (The)

Pre-earnings Volatility Scalp

IDEA: The idea is to own a straddle with a longer expiration and sell a straddle with the closer expiration to benefit from the time decay in the shorter-term options. It's a fine cut to try to make this work, but this trade does not take earnings risk, does not take stock direction risk and take very little volatility risk.

WHEN IT WON'T WORK: This trade will not work if the underlying stock moves a lot before earnings, in particular if moves more than the value of the short straddle.

We have a video covering this strategy. Start at time 4:00 here: Custom Strategy Builder

Here is a full blown dossier using Alibaba as an example: Advanced Earnings Option Trade in Alibaba

Post-earnings Long Straddle

IDEA: Much like the pre-earnings straddle strategy, the idea here is to own a short-term straddle in a period of time that the stock may be prone to large moves, but in this case, it's after earnings so the implied volatility is lower.

WHEN IT WON'T WORK: This trade will not work if the underlying stock does not move a lot after earnings.

Here is a full blown dossier using Nvidia as an example: The Volatility Option Trade After Earnings in NVIDIA Corporation

Post-earnings Short Put Spread

IDEA: What we're after with this approach is identifying companies that make the stock move the day after earnings -- whether that's up or down -- and after that, find a sense of equilibrium in the stock price for the next month.

WHEN IT WON'T WORK: This trade will likely show losses if the underlying stock moves down a lot after earnings, but it can move down 'a little,' and still show profits.

Here is a full blown dossier using CBOE as an example: The Option Trade Right After Earnings in CBOE Holdings Inc

Post-earnings Short Iron Condor

IDEA: Similar to the short put spread after earnings back-test, this trade looks to find stocks where the price finds an equilibrium after earnings and stays range bound.

WHEN IT WON'T WORK: This is a straight down the middle volatility bet -- this trade wins if the stock is not volatile the three weeks following earnings and it will stand to lose if the stock is volatile.

Here is a full blown dossier using AutoZone as an example: The Range Bound Vol Trade After AutoZone Earnings

Technical Long Strangles

IDEA: Find times when stocks are about to make a large move so that owning a strangle (a call and a put) yields a postive return. The trigger is two different technical requirements.

WHEN IT WON'T WORK: This is a straight down the middle volatility bet -- this trade wins if the stock is volatile and it will stand to lose if the stock is volatile.

Here is a full blown dossier using Amazon as an example: The Exact Trigger that Indicates a Volatility Trade in Amazon