Option Strategies for Earnings Announcements: A Comprehensive, Empirical Analysis
By trading on corporate earnings, investors can reliably profit in both up and down markets, while avoiding market risk for nearly the entire quarter. In this book, two leading traders and portfolio managers present specific, actionable techniques anyone can use to capture these sizable profits. Ping Zhou and John Shon have performed an unprecedented empirical analysis of thousands of stocks, reviewing tens of millions of data points associated with option prices, earnings announcement returns, and fundamentals. Their massive analysis has identified consistent opportunities associated with focusing on the magnitude of the market’s reaction to earnings, not its direction. Option Trading Set-Ups for Corporate Earnings News offers concrete guidance for improving the likelihood of making correct forecasts, and managing the risks of incorrect forecasts. It introduces several ways to exploit option trading opportunities around earnings news, discuss crucial issues that most retail investors haven’t considered, and explore aspects of earnings-related option trading that have never been empirically examined and documented before. For example, they identify hidden patterns and potential opportunities based on valuation, industry, volatility, analyst forecasts, seasonality, and trades that immediately follow earnings announcements. Simply put, trading on earnings reports offers immense profit opportunities, if you know how. This book provides incontrovertible facts and detailed strategies, not just theories and anecdotes!
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Long Volatility Trades
Bearish Directional Trades
Further Expiration Dates
Buy Volatility before Earnings Announcements
Ride the PostEarningsAnnouncement Drift
Improve the Odds of Winning
Historical Earnings Announcement Returns
Performance of Long and Short Straddles around Earnings
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1st Quartile Absolute BidAsk Spread absolute earnings announcement analysis Annual Performance Appendix average return baseline bid price chapter data are provided decay Detailed data earnings announcement returns earnings surprises Figure fiveday holding period Further Expiration Dates future absolute EARET higher implied volatility historical absolute EARET hit ratio impact implied volatility group investors long and short long call strategy long put strategy long straddles long volatility trades market cap mean and median mean median median return midpoint nearmonth negative earnings announcement option strategies OTM strategy outofthemoney P/E ratios PEAD Percentage BidAsk Spread Performance of Long Performance of Short predict price movement provided in Table put options quintiles ratios of long return of short sample short call strategy short put strategy short straddles short volatility trades stock price straddle strategy straddles and strangles straddles around earnings strike price trades were profitable twoday holding period volatility before earnings volatility collapse worstprice