Reward 500 Tiger-coinsThis week marks the most volatile earnings week of the season. The market is punishing bad earnings and rewarding good ones—yesterday, some strong performers surged over 20%, while certain earnings misses dropped more than 20%.
Is this the perfect time to use a strangle strategy—betting on volatility instead of direction? But of course, if you get it wrong and the stock doesn’t move enough, you could lose money...
What is a Strangle?
Long Strangle: Buy one out-of-the-money call and one out-of-the-money put before earnings, betting on a big move in the stock price — either up or down. As long as the move is large enough, you can make money.
Short Strangle: Sell one call and one put, betting the stock won’t move much after earnings. The goal is to profit from time decay and the implied volatility (IV) crush.
Example 1: $Duolingo, Inc.(DUOL)$
📅 Day before earnings close: $315
Post-earnings surge: +13%, closing at $390 (up $75)
Pre-earnings position: Buy $340 Call + $290 Put
Assume premiums: Call $15 + Put $10 = Total cost: $25
Post-earnings outcome:
$340 Call becomes in-the-money, value = $390 - $340 = $50
$290 Put becomes worthless, value = $0
💰 Total value = $50 → Net profit = $50 - $25 = $25*100= $2500
DUOL’s earnings beat expectations significantly, and the stock spiked well past the breakeven point (around $340 + $25 = $365).
Buying a strangle clearly paid off.
Example 2: $NEBIUS(NBIS)$
Day before earnings close: $55
Post-earnings surge: +18%, closing at $65 (up $10)
Pre-earnings position: Buy $60 Call + $50 Put
Assume premiums: Call $5 + Put $4 = Total cost: $9
▶️ Post-earnings outcome:
$60 Call is in-the-money, value = $65 - $60 = $5
50 Put is worthless, value = $0
💰 Total value = $5 → Net loss = $5 - $9 = -$4 ❌ Loss
Even with an 18% gain, the stock didn’t break the breakeven point ($60 + $9 = $69). That’s likely because IV dropped sharply after earnings, reducing the value of the options.
The move wasn’t big enough = a loss.
So in this case, would a short strangle have worked better instead? After all, the post-earnings IV crush is very real.
Tips!
Stock selection: Focus on stocks with a history of big post-earnings moves — like DUOL, COIN, etc. Historical data shows average moves exceeding 10%.
Timing: Be extra cautious if implied volatility has already been driven up before earnings. If the premium is too expensive, the risk of loss when buying a strangle increases significantly.
What do you think:
Strangle During Earnings Season: Buy or Sell?
Which big-swing stocks would you try with strangle? (options carry risks, try it in demo account)
What’s the best earnings season strategy?
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Comments
Instead of relying on options, I prefer trading the underlying stock directly. This way, I’m not fighting time decay or IV changes — just the price action. If a company beats expectations and shows strong momentum, I can ride the upside; if it disappoints, I can short or stay out. It’s simpler and avoids the breakeven math in options.
For those comfortable with options, strangles can work with the right stock and timing, but I stick to trading the stock itself. Earnings season is all about speed, discipline, and reacting quickly to the numbers.
@Tiger_comments @TigerStars
Buy a strangle to profit from a large price swing, or sell one to profit from minimal movement and low volatility
This approach works best with high-volatility stocks like the Mag7 that have a history of big post-earnings moves
The best earnings season strategy depends on expected price movement and implied volatility。。。
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@Huat99