Best Options Strategies Around Earnings
Earnings announcements are the most predictable volatility events in options trading. Every publicly traded company reports earnings quarterly, and in the days leading up to the announcement, implied volatility inflates as the market prices in the unknown binary outcome. This IV expansion — and the IV crush immediately after the announcement — creates two distinct and opposite trading opportunities. Pre-earnings, when IV is still rising, buying straddles or strangles locks in the right to profit from either a large move up or down. The trade works if the actual post-earnings move exceeds the premium paid for both options. Post-earnings (or the week before when IV is already elevated), selling strategies like iron condors, iron butterflies, and short straddles profit from the IV crush that follows the announcement — regardless of which direction the stock moves, as long as it stays within the expected range. Calendar spreads offer a hybrid approach: selling the near-dated expiration straddling earnings to capture the IV spike while owning a longer-dated option at the same strike that holds its value after the crush. Understanding where IV stands relative to its historical range is essential — the same earnings trade can be a buy or a sell depending on whether the current IV Rank is below or above 50%.
Top Strategies for This Condition8 strategies
Neutral short-term, moderately bullish long-term — want to collect near-term theta while holding a longer-dated call; implied volatility is low and expected to rise
Neutral short-term, moderately bearish long-term — or using it as a low-cost hedge that profits from the stock staying near the strike then declining later
Expecting a large move in either direction — such as before earnings, a Fed announcement, or a major breakout — and implied volatility is low relative to expected realized move
Expecting a large move in either direction but want lower cost than a straddle — out-of-the-money strikes reduce premium but require a bigger move to be profitable
Neutral with high implied volatility — want maximum premium collection from selling an ATM straddle while using wings to create defined risk
Neutral with high implied volatility — expecting the stock to stay within a defined range through expiration; the most popular defined-risk, premium-collection strategy
Expecting the stock to move significantly away from the middle strike in either direction — the opposite of the long butterfly, profits from movement rather than pinning
Expecting a significant move away from the middle strike in either direction — profits from movement, identical in payoff to the short call butterfly but constructed with puts
EdgeOS bull and bear counts around earnings require careful interpretation. A stock entering earnings with bull count 2–5 has established upward momentum — if the earnings confirm the trend, the count often accelerates to 7–9 post-announcement, making bull call spreads or short put spreads compelling pre-earnings plays. Conversely, a stock at bull count 8–9 entering earnings is at exhaustion — the risk of a post-earnings reversal is elevated regardless of the results, because profit-taking at exhaustion is systematic.
What to Avoid in This Condition
- Covered Call — You own a stock, are neutral-to-moderately bullish, and want to generate monthly… (opposite conditions apply here)
- Short Naked Put — Bullish or neutral on a stock you would be willing to own — want to collect inco… (opposite conditions apply here)
- Long Call Ladder
- Bear Call Ladder — Expecting a very large move to the upside or downside — if the stock rallies dra… (opposite conditions apply here)
- Bull Put Ladder — Expecting a large move to the downside or a rally — the two long puts at lower s… (opposite conditions apply here)
Frequently Asked Questions
What are the best options strategies for best options strategies around earnings?
The top options strategies are: Call Calendar Spread, Put Calendar Spread, Long Straddle, Long Strangle, Iron Butterfly, Iron Condor, Short Call Butterfly, Short Put Butterfly. The answer depends on IV Rank. If IV Rank is below 50% (IV is historically low heading into earnings), buy straddles or strangles — the IV expansion before and after earnings will add value. If IV Rank is above 50% (IV already elevated, market already pricing in a large move), sell iron condors or iron butterflies to capture the IV crush after the announcement. Never sell naked straddles into earnings without defined risk — the move can be catastrophic.
Should I buy or sell options in best options strategies around earnings?
The answer depends on IV Rank. If IV Rank is below 50% (IV is historically low heading into earnings), buy straddles or strangles — the IV expansion before and after earnings will add value. If IV Rank is above 50% (IV already elevated, market already pricing in a large move), sell iron condors or iron butterflies to capture the IV crush after the announcement. Never sell naked straddles into earnings without defined risk — the move can be catastrophic.
How does best options strategies around earnings affect options premium and implied volatility?
Earnings create the most predictable implied volatility pattern in all of options trading. IV inflates in the 2–4 weeks before earnings as uncertainty builds, peaks the day before or morning of the announcement, then collapses 30–60% immediately after the release — this is the "IV crush." Strategies that benefit from IV expansion (long straddles, long strangles) should be entered 2–3 weeks before earnings. Strategies that benefit from IV crush (iron condors, short straddles) are typically entered 1–7 days before earnings when IV is at its peak.