Event Volatility

Check the company's investor relations website, SGX announcements, or financial news sites. Singapore banks typically report quarterly - late April/May, July/August, October/November, and February. Set calendar reminders 2-3 weeks before expected dates.

It depends on your goal. Exit before if you want to capture IV expansion without binary event risk (vega trade). Hold through if you believe the stock will move more than expected (gamma trade). Most traders exit before unless they have strong conviction on the move.

IV crush is typically 20-50% of the pre-event IV level. For example, if IV was 35% before earnings, it might drop to 20-28% after. The exact amount depends on the stock, surprise factor, and market conditions.

Only stocks with liquid options are suitable. In Singapore, this primarily means DBS, OCBC, UOB, Singtel, and STI options. Less liquid stocks may not have sufficient options volume or tight spreads.

If you're long vol (bought straddle), you lose from theta decay and IV crush - the straddle will be worth less. If you're short vol (sold iron condor), small moves are good - you keep premium as IV crushes.

Take the ATM straddle price and multiply by 0.85. For example, if DBS ATM straddle costs S$2.00, expected move is ~S$1.70. This represents roughly a 68% probability range for the stock after the event.

Typically 10-14 days before earnings, before major IV expansion begins. If IV has already spiked significantly, you've missed the easy part of the vega trade. Check IV Rank - entry is better when IV Rank is still relatively low.

Sell the option in the expiration that captures earnings (front month), buy the same strike in the next expiration (back month). Enter 1-2 weeks before; exit the day after earnings. You profit from front month IV crushing more than back month.

Straddles have more vega/gamma but higher theta cost and higher capital requirement. Strangles are cheaper with less theta decay but need bigger moves to profit at expiration. For pure vega trades exiting before event, straddles often work better.

Fed announces at ~2 AM SGT. You can: (1) Enter long vol before and hold through overnight, (2) Enter short vol the morning after if no surprise, (3) Avoid the event. The gap risk overnight is the main challenge.

Use forward variance calculations: σ²_event ≈ (T_post × IV²_post - T_pre × IV²_pre) / (T_post - T_pre). Compare this extracted event vol to historical realized event moves to assess if options are expensive or cheap for the event.

Studies suggest implied event vol typically exceeds realized by 10-30%. This means short vol has positive expected value on average. However, the premium varies by stock, event type, and market regime. Individual events can still exceed implied.

Define signals (IV rank entry, expected move vs historical, term structure), rules (entry timing, structure, sizing), exit criteria (profit target, time-based, stop loss), and backtest across multiple events. Challenge is limited sample size per stock.

Track aggregate Greeks across all positions. Reduce size if events are correlated (e.g., banks reporting same week). Set portfolio-level limits (e.g., max 15% in event trades). Diversify across event types and timing.

They exist on a continuum. Pure vega trade exits before event, capturing IV expansion. Gamma trade holds through event, needing realized move > expected. You can start as vega trade and decide at event time whether to hold for gamma based on current P&L and conviction.