Earnings and IV - Options on Futures | futures io social day trading
futures io futures trading


Earnings and IV
Updated: Views / Replies:551 / 8
Created: by DarkPoolTrading Attachments:1

Welcome to futures io.

(If you already have an account, login at the top of the page)

futures io is the largest futures trading community on the planet, with over 90,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

Reply
 
Thread Tools Search this Thread
 

Earnings and IV

  #1 (permalink)
 Vendor: diversifyportfolio.com 
PTA, Gauteng
 
Futures Experience: Advanced
Platform: Self built + Sierra + TWS
Favorite Futures: Stocks and Options
 
DarkPoolTrading's Avatar
 
Posts: 1,036 since May 2012
Thanks: 1,244 given, 1,304 received

Earnings and IV

Hey all,

IV tends to increase the nearer you get to a stock's earnings announcement. Does this affect all expiration dates and to what extent?

For example if im looking to sell premium on longer dated options (eg: +- 60 to 100 DTE), how much of an affect does a pre-earnings IV increase have on these options in comparison to the shorter term (eg: +- 30 DTE) expirations?

I know there are earnings plays where people try to profit from either a build up in IV pre-earnings or a drop in IV following the announcement (depending on their strategy/style etc). But that is not what my goal is. My goal is longer term premium collection so im interested how affected these longer term expirations are to earnings.

For example lets say I sell premium on an option that is currently 90 DTE and earnings is scheduled for 30 days from now. Therefore when earnings comes around I will have benefited from 30 days theta decay (all things being equal in a perfect world). However at that point IV may potentially have increased due to the earnings announcement resulting in increased premiums, which would therefore reduce or eliminate any profits on my position. However following earnings there is often a volatility drop which will result in premiums once again dropping.

That is why im curious about how much of an affect earnings have on further out expirations?

Many thanks.

Diversification is the only free lunch
Reply With Quote
 
  #2 (permalink)
Quick Summary
Quick Summary Post

Quick Summary is created and edited by users like you... Add FAQ's, Links and other Relevant Information by clicking the edit button in the lower right hand corner of this message.

 
  #3 (permalink)
Administrator: Retired Backtester
 Vendor: speedytradingservers.com 
Rennes France
 
Futures Experience: Advanced
Platform: NinjaTrader
Broker/Data: IB/Kinetick
Favorite Futures: Futures
 
sam028's Avatar
 
Posts: 3,366 since Jun 2009
Thanks: 3,574 given, 3,982 received


I do not have the answer , but it's an interesting question and you may find some research papers done on this.
In theory earnings dates should affect IV, but how much, that's the question...

Success requires no deodorant! (Sun Tzu)
Reply With Quote
The following user says Thank You to sam028 for this post:
 
  #4 (permalink)
Trading for Profit
Atlanta GA USA
 
Futures Experience: Advanced
Platform: thinkorswim/Ninja Trader
Favorite Futures: stock options; ES, TF, 6E, 6J
 
Posts: 214 since Aug 2013
Thanks: 51 given, 207 received

On some popular stocks, like NFLX which reports tomorrow after close, IV can really skyrocket. I think at last earnings IV percentile was like at 150%. As a matter of fact, I'm planning on doing a IV play on it on Thursday after earnings are announced on Wed. after close. The IV will still be up for an hour or two after open, I will sell premium with a credit spread behind S/R created from the first hour or two of trading, and then when the IV crush comes later in the day it will suck all the value out of the options in my spread.

For example lets say I sell premium on an option that is currently 90 DTE and earnings is scheduled for 30 days from now. Therefore when earnings comes around I will have benefited from 30 days theta decay (all things being equal in a perfect world). However at that point IV may potentially have increased due to the earnings announcement resulting in increased premiums, which would therefore reduce or eliminate any profits on my position. However following earnings there is often a volatility drop which will result in premiums once again dropping.


That is correct. Since you're holding past the earnings 60 days, the vol crush after earnings should put you back in profit. But generally speaking, you sell premium when IV% is high, and buy directionals when IV% is low, and debit spreads when it's in between. You benefit from vol crush when IV is high, and when IV is low, then it rising becomes wind in your sails to increase the value of your directionals.

Reply With Quote
The following 2 users say Thank You to emini2000 for this post:
 
  #5 (permalink)
 Vendor: diversifyportfolio.com 
PTA, Gauteng
 
Futures Experience: Advanced
Platform: Self built + Sierra + TWS
Favorite Futures: Stocks and Options
 
DarkPoolTrading's Avatar
 
Posts: 1,036 since May 2012
Thanks: 1,244 given, 1,304 received

Thanks for the replies,

So in continuing to use NFLX as an example which is reporting earnings after the close today i've attached a screenshot of IV for the last 2 months for the OCT/NOV/DEC expirations.

Obviously OCT has spiked the most and the further expirations look much flatter. However looking at the IV last friday compared to today, NOV has increased about 10% and DEC has increased by about 5%. So although much smaller for the further dated options, there certainly has been a marked increase in only 3 days.

So what im busy wrapping my head around is the affect this would have on longer term premium selling (+-90DTE). It may be best to do this right before earnings when IV is highest. However if already in a trade for the last 30 days you will probably experience short term losses until either the IV drops post earnings,....or you continue holding and wait to benefit from further theta decay. Just thinking out loud here.

Does anyone know if any 'what-if' or scenario type options tools are available? Im not talking about backtesting, but rather something that allows you to enter a specific trade and then alter various parameters (DTE, IV, etc) to see how the position would be affected. I know there are products like optionvue but that's a bit out of my price range. My broker is IB so I have access to the Volatility Lab, Probability lab etc but as far as im aware none of them really allow you to run 'what-if' type scenarios on potential positions. Please correct me if there is a way to do it...

Thanks.

Diversification is the only free lunch
Attached Thumbnails
Earnings and IV-capture.png  
Reply With Quote
 
  #6 (permalink)
Elite Member
Luxembourg, Luxembourg
 
Futures Experience: Advanced
Platform: TWS
Broker/Data: Interactive Brokers
Favorite Futures: Stocks
 
Posts: 491 since May 2012
Thanks: 1,641 given, 1,126 received


DarkPoolTrading View Post
Does anyone know if any 'what-if' or scenario type options tools are available? Im not talking about backtesting, but rather something that allows you to enter a specific trade and then alter various parameters (DTE, IV, etc) to see how the position would be affected. I know there are products like optionvue but that's a bit out of my price range. My broker is IB so I have access to the Volatility Lab, Probability lab etc but as far as im aware none of them really allow you to run 'what-if' type scenarios on potential positions. Please correct me if there is a way to do it...

OptionsOracle can give a scenario analysis for a portfolio with stocks / options. I used it in the past to see how adding options positions would impact my portfolio. Never tried it with naked short positions though, but think it should be able to handle it.

Unfortunately I could not get it running on my new PC - there seems to be a plug-in missing, but I never spent much time trying to fix the situation. For my simple style of trading, I can just use excel.

Reply With Quote
The following user says Thank You to grausch for this post:
 
  #7 (permalink)
Elite Member
Sweden
 
Futures Experience: Intermediate
Platform: Multiple
Favorite Futures: Multiple
 
Posts: 31 since Jun 2009
Thanks: 66 given, 25 received

In IB TWS you can use Performance Profile .
https://www.interactivebrokers.com/en/?f=%2Fen%2Fgeneral%2Feducation%2Fpdfnotes%2FPDF-OptionTrader.php%3Fib_entity%3Dllc
See this video
https://www.youtube.com/watch?v=oxMaSbIQjaw

Reply With Quote
The following user says Thank You to platon for this post:
 
  #8 (permalink)
Elite Member
NYC, NY
 
Futures Experience: Intermediate
Platform: Sierra Qtrader
Broker/Data: Amp and Optimus and CQG
Favorite Futures: Mainly NG and GC, 6A, 6E
 
Posts: 414 since May 2013
Thanks: 331 given, 150 received

Best earnings strategy

Folks: You can use TOS and thinkback as well to simulate these trades and view IV

There are a few strategies for which i have done much research and traded with only limited success
1) Buy straddle/strangle into earnings and take it off prior to earnings (use the Vol increase)
2) Sell ICs Out of the money prior to earnings and wait for Vol crush post earnings
3) Buy Double calendars : Same concept wait for Vol crush
4) Iron Butterfly - this is what i am researching now

The 1st one: Can make little money.. safer but doesnt work all the time
I have been burnt with selling ICs on large stocks like google and for other smaller stocks not worth my time for the credit
Double calendars - tricky based on back month vol

So now looking at Iron Flys.

any comment is welcome

J

Reply With Quote
 
  #9 (permalink)
Trading for Profit
Atlanta GA USA
 
Futures Experience: Advanced
Platform: thinkorswim/Ninja Trader
Favorite Futures: stock options; ES, TF, 6E, 6J
 
Posts: 214 since Aug 2013
Thanks: 51 given, 207 received


jokertrader View Post
I have been burnt with selling ICs on large stocks like google and for other smaller stocks not worth my time for the credit

Yeah, hard to do those ICs on stocks that traditionally move a lot on earnings. You have to go too far out to get beyond the expected move and can't get the premium a lot of times.

Reply With Quote

Reply



futures io > > > > Earnings and IV

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)

Jigsaw Trading: TBA

Elite only

FuturesTrader71: TBA

Elite only

NinjaTrader: TBA

Jan 18

RandBots: TBA

Jan 23

GFF Brokers & CME Group: Futures & Bitcoin

Elite only

Adam Grimes: TBA

Elite only

Ran Aroussi: TBA

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
Where to download IV history for free? mikhail12 Options on Futures 1 June 3rd, 2015 11:33 AM
IV Rank OR IV percentile ? hobs ThinkOrSwim 0 March 12th, 2015 06:56 PM
IV for forex tinkerz ThinkOrSwim 0 August 13th, 2014 05:46 PM
Calculate IV Level where most days are less HumbleViking ThinkOrSwim Programming 3 March 15th, 2014 01:49 AM
IV RankLevels (Make them Dynamic?) DonStar ThinkOrSwim 1 February 23rd, 2014 05:12 PM


All times are GMT -4. The time now is 04:53 PM.

Copyright © 2017 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts
Page generated 2017-12-16 in 0.14 seconds with 20 queries on phoenix via your IP 54.163.210.170