Event Volatility

Both have advantages. Pre-event offers higher premium but carries overnight gap risk - you can't react to the news. Post-event has lower premium but known stock price and no gap risk. Beginners often start with post-event trading to avoid binary overnight risk.

IV crush is likely the culprit. When you buy a straddle before earnings, you're paying elevated IV premium. After earnings, IV drops 30-50%, causing both options to lose value. The stock must move MORE than the expected move to overcome this crush. Many moves are 'priced in.'

Multiple sources: your broker's platform (usually shows on option chain), company investor relations website, financial websites like Yahoo Finance or MarketWatch, and dedicated earnings calendars like Earnings Whispers. Always verify - dates can change!

Earnings affect individual stocks with high IV premiums (30-100%+ increase). FOMC affects indices and rate-sensitive sectors with moderate IV premiums (10-30% increase). Earnings occur quarterly per company; FOMC is 8 times per year for the entire market. Earnings have higher individual stock volatility; FOMC affects everything simultaneously.

Very limited ability. After regular hours, you can trade the underlying stock in some cases, but options markets are closed. For AMC (after market close) earnings, your options position is locked until the next morning when markets open. The gap is already done. This is why sizing and structure selection are so critical.

Straddles cost more but profit from ANY significant move because they're ATM. Strangles cost less but need bigger moves because both options are OTM. Use straddles when you expect the stock to move but unsure how much. Use strangles when you expect a very large move that will exceed both strikes. Straddles have higher probability of some profit; strangles have higher potential return if the big move materializes.

Not necessarily avoid, but be aware it's a coin flip. When historical actual/expected ratio is near 1.0, there's no clear edge for long or short strategies. Consider: (1) skipping these, (2) using smaller size, or (3) finding other factors (IV premium, specific news) that might give an edge. The best opportunities are stocks with consistent patterns (always exceeding or always undershooting).

Common practice is 5-10% beyond expected move. If expected move is $10, place short strikes at $11-12 beyond ATM. Also consider: (1) maximum historical move for this stock, (2) any unusual factors for this specific event, (3) your risk tolerance. More buffer = less premium but higher probability of profit.

For most strategies, 1-5 days before the event is optimal. Too early (>7 days) means you pay excess theta while waiting. Same day entry means maximum IV but least flexibility. 2-3 days out is often ideal - IV is elevated but you have time to manage. For calendars specifically, entering slightly earlier can capture more of the IV ramp.

For long volatility positions: exit within the first 30-60 minutes post-event. IV crush is fastest initially - holding longer usually just loses to continued theta decay. For short volatility positions: if profitable, consider taking 50% of max profit quickly rather than waiting for full decay. The edge diminishes over time as IV normalizes.

Track for each event: (1) Stock, date, event type, (2) Pre-event IV, expected move, (3) Actual move, post-event IV, (4) Variance ratio (actual/implied), (5) Your position and P&L. Over 50+ events, patterns emerge. Calculate statistics by stock, sector, and strategy. Use this to refine your selection criteria and sizing. Automate data collection where possible.

Dealers accumulate gamma from customer hedging activity. Large positive dealer gamma means they buy dips and sell rips (stabilizing). Large negative gamma means they buy rallies and sell selloffs (amplifying moves). Before events, dealer gamma positions can predict post-event dynamics. Monitor via options flow data or gamma exposure (GEX) estimates. Adjust your strategy based on likely dealer behavior.

Most professional approaches allocate 15-30% to event-specific trades, with strict per-event limits (1-3%). During peak earnings season, aggregate event exposure might reach 50% briefly but should be actively managed. Key constraints: (1) never risk more than you can lose on any single event, (2) diversify across sectors and dates, (3) maintain enough cash for opportunities and margin requirements.

Recognize that tech earnings cluster together, banks report similar weeks, etc. Methods: (1) Set sector exposure limits (e.g., max 10% in any sector's events), (2) Stagger entries to avoid all positions being vulnerable simultaneously, (3) Use some long and some short positions in the same sector to hedge, (4) Reduce size during peak correlation periods, (5) Stress test portfolio for sector-wide moves.

Macro events (FOMC, CPI) affect all stocks simultaneously. Check your event calendar holistically - don't have large positions vulnerable to both stock-specific AND macro events. Either: (1) avoid stock positions through major macro events, (2) hedge macro exposure separately (e.g., SPY position), (3) size smaller when macro/micro events coincide. Macro events also affect individual stock IV, even outside earnings.