During Earnings, traditional market makers will take advantage of the discrepancy between what the market thinks the stock will do at the Earnings date, and what the actual movements of the stock will be. If there is a discrepancy between the perceptions of Implied Volatility versus the actual Implied Volatility, then they can take advantage.

When there is too much uncertainty in the market, market makers sell Volatility with the idea that the market will revert to itself, and so will the Implied Volatility, and hence the stock. Traditionally, market makers do not have a directional bias, but instead they build a market neutral strategy and sell Volatility on both the Bullish side and Bearish side of the stock.

At Tradespoon, we actually believe in directional bias and provide you with Short Term and Long Term scores. So let’s go to some of these examples. Tradespoon provides you with a Seasonal Chart which shows the binary event such as Earnings from a historical perceptive, and helps you to learn how the stocks behave before Earnings and after Earnings. Seasonal Charts also show the future price movements and how the current price movements correlate to the historic information.

The Tradespoon Bulls tool shows the directional bias, though not on all the stocks, rather the ones that are most predictable and follow a common pattern. If you pick ‘Earnings with 20 days’ as the selection criteria, we will show you stocks with high IV Rank that have Earnings within the next 20 days and also give you the directional bias on those stocks.

Do note that you sell OTM Options when the IV Rank is high and Tradespoon Score is greater than 9. Also keep in mind that most Optimal Strategies are either Calendar Spreads or Credit Spreads.

Always close your Long Term positions before earnings or if you are still bullish on the stock, roll positions with high POS. Follow these same rules for POS V/S ROC and try to collect 30% the width of the Strikes, as this is usually a Delta value of 70 or 80. This is what you want to look for when selling the options.

Finding the Right Strategy
To find the most Optimal Strategy, use the Tradespoon Builder to enter the ticker and the time horizon, and it will recommend the most Optimal Strategy. It is always ideal to target 60%-80% POS. If you are selling Puts, this means a Delta of 20 or 30 for Short Puts and 70 and 80 for Long Puts. Use the Tradespoon Short Term trend to deal with directional bias, that is, to analyze whether the stock is going up, down or continue to trade sideways. And again reduce your Cost Basis by selling OTM Option Spreads.


I. Tradespoon 101

II. Advanced Options Strategies

The Greeks

III. Technical Analysis

Introduction to Technical Analysis


Chart Patterns

Reading Predictions

IV. Developing a Trading Plan

Portfolio Management


Tradespoon e-Book Home