If you want to take risks during Earnings season..
my thoughts are, "Why not always use a straddle?" (Options that is).
http://www.888options.com/strategy/long_straddle.jsp
http://community.nasdaq.com/News/20...-season-know-your-options.aspx?storyid=115394
Think about this regarding the Google situation Friday, and this upcoming week.
(I'm currently holding a Bull Spread on CAT - 1 BUY AT 110 and 2 SELL at 115, Feb expriation. But I'm thinking of straddling it. I might straddle AAPL too.)
Please, since I am fairly new at options, give your opinions. Good luck all!
Going for my first Straddle today (market close in 5 minutes and announcement after close). 1 Call and 1 Put $5 strike.
Still holding a Bull spread on CAT for Thursday. 1 Call Buy 110/1 Call Sell 115.
I'll let you know how it fares.
Uh oh, be careful with that. I hope this is a demo trade.
Options typically gain in value prior to earnings, so the idea is to sell before the actual earnings announcement. The reason for this is that volatility, the main driver in the price increase, tends to drop off very sharply following the announcement such that you might actually lose money even if your call was correct.
I've never played a straddle on earnings, but I've definitely seen the bloat in premiums, so tell us how it goes.