Build a Data-Driven Earnings Playbook

This wiki is your reference hub for trading options around earnings using implied volatility, historical moves and post-earnings drift.

Inside you’ll find plain-language explanations of key concepts (IV, implied move, IV crush vs IV rush, PEAD), step-by-step breakdowns of long and short volatility strategies, and tutorials for tools like IV Rush Radar, Moves Analyser, Simulator and DriftLab.

The goal is to help you move away from random lotto tickets and towards a repeatable, statistically grounded process every earnings season.

Scheduled quarterly report (EPS, revenue, guidance). The timing (AMC/BMO) determines which option expiration carries the event risk.

AMC (After-Market Close): results after the bell on day D; first tradable reaction is day D+1. The nearest expiration that includes D+1 (often that week’s Friday) carries most of the event IV.

BMO (Before-Market Open): results before the bell on day D; first tradable reaction is the same day. The nearest expiration that includes day D carries most of the event IV.

Realized % change around earnings (commonly: close before release → first close after release). Keep the convention consistent so it’s comparable to the implied move.

Market-implied % move for the event. Quick proxy: (ATM call + ATM put) ÷ stock price for the expiration that contains the first post-report session. Use it to size trades, compare breakevens to history, and set profit/stop thresholds.

Learn more: Implied move around earnings (examples & trade setups) .

Option-implied uncertainty. Typically rises into the event and resets lower after; it moves option prices but doesn’t predict direction.

Sharp drop in IV on the first session after the release; compresses option premiums and impacts positions held through the print.

Learn more: IV crush on earnings (mechanics, examples & risk) .

Stock price band where P/L flips on the event day. Compare a structure’s breakevens to the distribution of past earnings moves for the ticker.

Mean absolute earnings-day move over your lookback (e.g., recent years or 10-year history). Baseline for “typical” size.

Dispersion of past earnings moves. Higher std = wider range and fatter tails; if implied is modest relative to this, long-vol can be attractive.

Tendency for a stock to continue moving in the direction of the initial earnings reaction for multiple sessions after the event. Basis for “runners” strategies.

This section groups the core concepts that drive most earnings strategies: how the market prices the move (implied), how the stock actually behaves (realized), and how volatility rushes in and then collapses around the announcement.

Each mini-card below links out to a dedicated article with more charts, examples and trade templates.

Data-driven modeling of past IV to project whether the pre-earnings IV rise (“IV rush”) will outpace theta decay.

Comprehensive analytics of earnings-day moves—distribution, dispersion, and outliers—to understand a stock’s earnings volatility and set realistic targets.

Options simulator that models IV crush per strike and expiration to accurately project how any structure behaves through earnings, with probability stats and risk–reward analysis.

Analyzes short- and long-term post-earnings momentum—quantifying post-announcement drift (PEAD) and matching current runs to historical patterns to flag likely continuations.

Overview of the pre-earnings implied volatility build and how to trade it.

What is IV Rush

• Implied volatility (IV) tends to rise in the days/weeks before an earnings announcement, then drops sharply after the release (IV crush).
• The rise affects all expirations but is usually strongest in the nearest expiration to the event.
• Because IV lifts option premiums, implied moves quoted into earnings are typically higher than on regular days.

IV Rush vs IV Crush

IV and Implied Moves

• “Implied move” ≈ breakeven of the nearest-exp straddle (ATM call + ATM put) relative to stock price.
• Rule of thumb: (call price + put price) ÷ stock price.
• As IV climbs, option premiums rise → implied move increases.

Play IV Rush

• Why: pre-earnings approach that avoids the post-earnings crush by exiting before the event—generally more conservative.
• How: non-directional longs like ATM straddles or OTM strangles.
• Challenges: timing/intensity of IV rise and theta decay if entries are too early.

When to Enter & Exit

• IV commonly rises over days/weeks; a notable surge can occur in the final hours/day.
• To reduce theta, some traders enter near the open and exit before the close the same day when targeting the day’s IV build.

Bonus Factor: Pre-Earnings Price Moves

• The primary edge is IV expansion; favorable stock drift while holding a straddle can further offset theta and improve returns.

Realistic Targets

• This is a relatively conservative approach. Reasonable profit targets are often around +5% to +10% on the position.

Learn more: Detailed IV Rush guide (timing, examples & trade templates) .

Bet the actual earnings move will exceed the implied move.

What Happens on Earnings

• IV Rush: IV rises into the event; option prices and implied move increase.
• IV Crush: On the first session after the release, IV resets lower and premiums compress.

Core Idea

Long vol expects the stock’s movement to dominate IV crush and time decay. The focus is on magnitude, not direction.

Good Candidates

• Names with large average past earnings moves (recent and 10-yr lookbacks).
• High standard deviation of past moves (broad range).
• Current implied move at or below those historical averages.

When to Enter & Exit

• Typically enter before close on the last trading day before earnings.
• Exit the next day (often by midday). Pre-set profit/loss thresholds and stick to them.

How to Play

• Straddle: simple, high cost, high IV-crush exposure.
• Strangle: cheaper than straddle, very high reward potential, higher exposure to IV crush.
• Inverse butterfly: straddle + short OTM wings; cheaper and slightly softer to IV crush.

Bet the actual earnings move will not exceed the implied move; profit mainly from IV crush + theta.

Premise

Sell options before earnings when IV is elevated and buy back after the announcement at lower prices.

Risk Warning

Defined-Risk Structures

• Butterfly: capped loss, requires calibration.
• Iron condor / covered short strangles: limit tail risk while harvesting IV.

Good Candidates

• Stocks with low average past earnings moves and low std. deviation.
• Few historical outliers; avoid names prone to surprise gaps.

Recap

Short vol wins when IV crush + theta outweigh price move. Use capped-loss structures and careful sizing.

Directional follow-through after earnings—avoids IV rush/crush entirely.

Concept

Enter post-release and aim to ride the momentum that often persists for several sessions.

How to Play

• Simple calls/puts to express direction; choose expiries/strikes per risk tolerance.
• More conservative: use debit spreads to cap risk.

Good Candidates

• Big movers on earnings day with a history of post-release continuation and multi-day runs.

Longer walkthroughs that show how the concepts above look on real tickers and real option chains.

Watch the video on YouTube

Summary

• Event risk: IV rises into earnings (IV rush) and collapses after (IV crush). A big upside gap can make covered calls underperform or force assignment.
• Implied move = yardstick: Short calls only benefit if the actual move stays inside the implied move range.
• Cap risk: Don’t leave a lone short call through earnings. Convert it to a defined-risk vertical to limit worst-case loss.
• Defined-risk short-vol alternative: Consider inverse condors to harvest IV crush while capping tails.
• Calibrate with history: Choose strikes so breakevens exceed a high percentile of past earnings moves.

Watch the video on YouTube

Summary

• Strategy: Sell wide, closest-expiration strangles into earnings to capture IV crush; buy back at the open.
• Appeal: If the stock barely moves, premiums can collapse (e.g., sell ~$0.60, buy back near ~$0.01 ≈ ~98% gain).
• GOOGL past moves: Center ~5–5.5% but range from about −10% to +16%; ≥8% not rare.
• Calibration example: Delta-neutral strangle with ~±6–7% breakevens—too narrow vs realistic 10%+ tails.
• Outcome spectrum: ~5% move → ~+66%; ~8% → ~−100%; ~10% → ~−200% to −266%; ~16% tail → up to ~−1400% (small credit can balloon to large debit).
• Mitigation: Use defined-risk structures (e.g., butterflies) to cap loss.

Watch the video on YouTube

Summary

• Philosophy: Treat earnings as a numbers game — use data (implied move vs. historical moves) to calibrate setups with controlled risk and known likelihoods.
• Structure: Prefer defined-risk long-vol setups such as inverse condors / inverse butterflies (ATM long straddle + short OTM wings) to reduce max loss versus a pure straddle.
• Recent examples (RDDT, COIN, DDOG): Targeted low max loss (~20–30%). Outcomes spanned a small planned loss (~−21%), a near breakeven (entered ~12.00 → exited ~11.81), and a ~+100% win on a low-cost position (~$65 notional).
• Picking tickers: From the calendar, filter for liquid names. Compare avg move, std dev, and implied move; favor high-dispersion stocks where implied looks modest relative to history.
• Case study (CVNA): Very volatile profile; recent years show min ~8% move, avg ~16%, wide range (~−45% to +45%). When it beats implied, the average excess is ~+13.7%; when it doesn’t, the shortfall averages ~7.2%. 80th-percentile move ≈ ~25%.
• Simulator insights:
  • Pure straddle: 0% move worst-case ≈ −84%; “realistic” 8% move ≈ −44%; 25% move ≈ +97% to +100% (~2:1 RR).
  • Inverse butterfly: Adding short OTM wings lowers max loss (e.g., 8% move ≈ −21%) while still keeping attractive upside (25% move ≈ +78%).
• Playbook: Start from stats → compose in Simulator (accounts for IV crush) → choose sizing/exit rules in advance → accept small, controlled losses to capture outsized wins when the move exceeds implied.

More video case studies on our YouTube channel:  youtube.com/@earningswatcher