By Lawrence G. McMillan
Buying straddles in advance of earnings is finally be coming back to life. For some reason, after the pandemic, it was not viable until this earnings quarter. In the last few weeks, however, there were profitable earnings moves in several names – including all four of our recommendations last week ($ROKU $FIS $TTD $ABNB).
The strategy is to buy straddles when the current cost, as a percentage of the underlying stock price, is less than at least five of the last ten post-earnings one-day moves. In addition, we look for a pattern of pre-earnings spikes in Composite Implied Volatility (CIV) in the stock’s options going back over that same ten-earnings time frame...
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