How does Earnings influences Options Prices

It’s important to realize that earnings announcements will influence the price of a stock. But how exactly? Is there a possibility that traders can take advantage of it? Find out how earnings increase the “uncertainty” of the future price of the stock. It inflates the price of their options, and thus makes them more attractive. Traders can sell options and profit when volatility contracts!

Besides the movement of the underlying and the days of expiration, Implied volatility is the most important factor that influence the options price. Because many companies announces their earnings. People get nervous and  it can become  a greater influence over the price of options than usual.

 

Below you see the earnings calendar.

Earnings Calendar provided by Investing.com.

See the video below how Rachel Fox from Tastytrade explains this.
Every quater companies publice their earnings. We see this as a binairy event. Excellent for selling options.
Most of the time options movements stays within the expected range. In Tastyworks you can see how much the stock is expected to move. We typically sell options for premium outside of this range. So that we can close this option position a few days later when the Implied Volatility has dropped.

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