Short Straddles - Exploit Earnings Option Volatility Crush

Name: Short Straddles - Exploit Earnings Option Volatility Crush
Rating: 4.3 (56 reviews)

Short Straddle Earnings trade on Priceline PCLN. Proper analysis identifies excellent Volatility arbitrage opportunities

Created byHari Swaminathan

Last updated 9/2021

English

What you'll learn

How to Exploit Implied Volatility behavior during the Earnings Cycle
Understand the Risks and Rewards of Naked Option spread selling
Learn to provide the appropriate safety mechanisms in such a trade
Create an explosive trading opportunity with acceptable risk management
Learn an exciting trade that's alive for barely 24 hours, but can be applied broadly to all stocks during earnings cycle

Course content

1 section • 7 lectures • 38m total length

Analytical Approach to Earnings Trades5:00
The Short Straddle can be an INTENSE trade. As a general approach, every stock is different when it comes to Earnings. Several trades are possible, and its important to pick the right one. This Introduction sets the right context for this trade.
Refresher of the Long Straddle5:13
This video is a Primer on Long Straddles. To play the Short Straddle trade, it's helpful to understand the Long Straddle trade. It's included so anyone needing a refresher on Straddles may find it useful.
Introduction to Short Straddle trade and Volatility Arbitrage Discussion4:48
Analysis of the Short straddle trade setup
Analysis and Construction of the Short Straddle Trade on Priceline (PCLN)3:06
Identification of a Volatility Arbitrage opportunity for the short straddle
Analysis and Construction of the Hedges and Risk Management for Short Straddle7:41
The Defense Plan. On any Naked Option trade, it's imperative to plan for the worst case or even a bad case scenario
Explosive Exit on the Trade6:08
Exiting the trade and maximizing the potential after the Volatility crush
BONUS LECTURE - DONT MISS !!6:57

Requirements

This is an Advanced Options course, so knowledge of Spreads is Required
You must be very clear on Concepts of Implied Volatility, Time Decay and Option Greeks
Some idea of the Earnings Reports cycles and their Effects on Option Prices

Description

Should we call this trade Priceline Earnings Explosion or Volatility Implosion. Splice and dice it any way you want, there is no doubt this trade is on Steroids. The trade takes advantage of a very specific Volatility Arbitrage situation noticed in Priceline on the day it was reporting earnings. This was a case of mispricing Implied Volatility on the next Option series. A fairly complex Short Straddle strategy, that worked like a gem. Only because the analysis leading up to the trade was Spot On the mark. Believe it or not, this sort of opportunities come up all the time during Earnings reports season. Once you learn this strategy and approach well, you can create very nice 1-day trades based on the Volatility Crush

Who this course is for:

An Options trader who already has at least a year or more with Options, and has experience with advanced spread trades