Good morning, traders…
If you’ve ever traded options around an earnings report, you’ve probably noticed: it’s not a normal setup.
Increased liquidity, retail trading, and elevated volatility all factor into how options are priced for an earnings report.
This leads to earnings trades being high-risk/high-reward setups. But you must understand the unique nuances of earnings season before you trade…
If you blindly buy puts or calls before an earnings print, you’re not trading … you’re gambling.
That’s no different than sports betting because anything can happen on any given day.
That said, earnings season can provide some incredible trading opportunities. It’s one of my favorite times to trade.
Because I use my Earnings Edge system.
This system predicts earnings beats with 89% accuracy.*
And today I’ll show you how.
If you don’t grasp the nuances of earnings season NOW, you could lose a lot of money by making reckless trades.
But if you can get a basic understanding of this concept before the season starts next week … you could see major gains!
Let Me Show You How My Earnings Edge System Can Transform Your Trading THIS WEEK…
The Pros and Cons of Earnings Season
Like anything else in the stock market, trading during earnings has its pros and cons…
Pros:
Potential for Large Gains
Earnings reports can cause substantial price movements in a stock. If you correctly predict the direction of the move, options can provide significant profits.
Increased Liquidity
The weekly options contracts around earnings reports will generally have far more volume (liquidity) than a garden-variety contract.
Defined Risk
When buying options, the maximum risk is limited to the premium paid for the option. Options during earnings are a unique type of high-reward setup.
Cons:
Unpredictability
Earnings reactions can defy logic. Companies can beat estimates and still see their stock drop, or miss badly and rally. Even when you’re right about the numbers, market reaction depends on guidance, analyst expectations, and factors you can’t predict from the outside.
High premiums
Options get expensive before earnings because everyone expects a big move (and that expectation gets baked into the price).
This is all due to one aspect of earnings season you can’t overlook…
What Is Implied Volatility (IV)?
The IV on contracts could be 20%, 50%, or 500% — all depending on the results of a mathematical formula.
The most common formula used to calculate options prices is known as the Black-Scholes model.
This model combines the option’s market price, the underlying stock price, the strike price, the time to expiration, and the current risk-free interest rate.
And it’s all to determine the overall IV — and the price — of the contracts.
Both puts and calls are more expensive if the contract’s IV is higher.
On the flip side, if a chart looks like a flat line with few price swings, the IV on those options will be lower.
Where IV Comes From
Implied volatility comes from the marketplace with the bid/ask spread.
If there’s a lot of buying of options at a certain strike price, IV will start to increase (making the contracts more expensive).
If there’s a lot of selling of options, IV will start to decrease (making options less expensive).
You can trade both sides, which is a primary reason why markets are fair and efficient.
When market demand goes up, IV goes up, increasing the option’s overall value.
External news-driven events (like an upcoming earnings call) can cause massive swings in the IV on short-dated options contracts.
This is why you must understand how IV reacts to earnings reports.
IV Crush
IV crush is the sudden drop in implied volatility that typically occurs after an earnings announcement.
Before the earnings report, IV is usually high due to the uncertainty surrounding the announcement.
Once the report is released and the uncertainty is resolved, IV tends to plummet, causing the value of options to decrease rapidly.
IV crush can be a big problem for options traders who bought options before the earnings announcement.
Even if the stock moves in the predicted direction, the decrease in IV can reduce the option’s value, leading to smaller-than-expected profits or even losses.
Most people don’t understand IV Crush. Even fewer know how to overcome it.
Bottom Line: To make money during earnings season, you need to find post-earnings moves that can outperform the inevitable drop in volatility…
And that’s exactly where Earnings Edge comes in…
How Earnings Edge Avoids These Risks
After watching five professional wealth managers destroy his portfolio during the COVID crash, my colleague Mr. Anderson decided to stop guessing and start “Trusting The Math.”
He brought his findings to me, and we built the Earnings Edge system…
Unlike retail traders gambling on earnings, this system doesn’t “guess” on 50/50 outcomes.
It uses six years of backtested data across more than 850 stocks to identify patterns that repeat with statistical significance.
It trusts the math.
The system scans historical price behavior around earnings to find stocks with proven track records of moving in predictable ways.
Mr. Anderson also built sentiment analysis into the model. It reads corporate language, analyst chatter, and market positioning to gauge whether the setup aligns with historical probability.
He’s spent years refining this filter.
He’s backtested thousands of historical trading days.
He’s refined the models.
He’s built the infrastructure to scan hundreds of stocks in real time.
And the results speak for themselves…
Mr. Anderson recently grew a small account from $3,000 to $32,000 in 52 days by “Trusting The Math” … despite 8 brutal market selloffs.*
But you don’t need to be a rocket scientist to do the same.
You just need to follow the alerts, manage your risk, work hard, and execute when the probability is in your favor.
That’s how you turn this season from a sketchy gamble into your very own Earnings Edge.
TOMORROW, October 8, Mr. Anderson is sharing his NEXT CALCULATED EARNINGS MOVE FOR FREE.
Save Your Seat For Tomorrow Night’s Briefing BEFORE THEY RUN OUT.
Trust me, you do NOT want to miss this one.
Happy trading,
Ben Sturgill
*Past performance does not indicate future results
