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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
Options trades structured around known upcoming events like earnings.
Why It Matters
Event plays let you bet on big moves from earnings, FDA decisions, or product launches. Options are uniquely suited for this - limited risk with unlimited reward if the stock gaps huge. But IV crush is the killer: even if you're right on direction, inflated premiums can eat your profits.
Key Points
- IV typically rises 20-50%+ before earnings, then crashes after
- Straddles/strangles let you profit from big moves in either direction
- Historical 'expected move' vs actual move helps estimate if options are overpriced
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When to Use Options
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Common Questions
Options trades structured around known upcoming events like earnings. Event plays let you bet on big moves from earnings, FDA decisions, or product launches. Options are uniquely suited for this - limited risk with unlimited reward if the stock gaps huge.
Event plays let you bet on big moves from earnings, FDA decisions, or product launches. Options are uniquely suited for this - limited risk with unlimited reward if the stock gaps huge. But IV crush is the killer: even if you're right on direction, inflated premiums can eat your profits.
IV typically rises 20-50%+ before earnings, then crashes after
Straddles/strangles let you profit from big moves in either direction
Historical 'expected move' vs actual move helps estimate if options are overpriced