We are back in earnings season. Given the possibility for big moves, we will look at the skip strike butterfly with calls, which you can find on page 108 of The Options Playbook. This is always available onoptionsPlaybook.com, in on the Amazon Kindle edition.
In this episode:
- What happens to implied volatiilty around earnings?
- The dynamics of the trade
- The more costly the underlying, the more costly the option
- AMZN announces earnings on 7/27 after the close
- What is the "expected move"?
- Picking a close expiration
- Selecting strikes
- What is the maximum risk?
- What is the break-even point?
- What if we are completely wrong?
- What is the best-case scenario?
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