How to make money playing IV rush with strangles

[Ryndir]

Hello all! This is my first forum post, i’m going to try to be as detailed as possible. Last week I made a signifcant chunk of money playing strangles pre earnings and selling before close. It worked on 5/5 plays last week, and now that i’m confident in it, I am wanting to share! IV always increases before earnings, so why not make money on that spike.

Things you will need to do this effectively:
Think Or Swim Mobile App, it has BY FAR the most accurate implied volatility indicator. It makes tradingviews look bad.
Access to option chains and being able to understand delta.
Picking FAR otm strikes with equal delta, HIGH volume and OI. These will not be affected by movements in the underlying.
I only play weeklies, even with 1DTE, IV will overpower theta. If any plays have only monthlies do not bother,
Easy peesy.

Pros: This trade has no directional bias, great for if you work an actual job and can’t constantly pay attention.
Cons: IV does not increase, you lose a small amount of the trade from theta. (I have yet to see IV not increase the day before earnings.)
Rule: Always close EOD.

My last earnings plays were:
SNAP- 70% Gain
MFST - 44% Gain
HOOD- 120% Gain
FB - 110% Gain
SPOT - 20% Gain

How I picked which tickers i’m going to play is based on the previous days OI and volume on whichever strikes I am interested in taking. Don’t play anything with low volume and low OI.

For example: Last week HOOD had a STACKED options chain. I bought 8.5P 5 mins after open for .16 a contract, and 12C for .12 a contract. I sold at the end of the day and the puts were STILL worth .16, and the calls were now worth .27.

How is this possible? IV and IV alone on OTM cheap strikes.

The beauty of this play is that because you are taking a strangle with calls and puts, the direction of the underlying dos not matter, if IV increases you will make money.

Before I dive into anything further, I want to show you exactly how I played HOOD.
First off, we NEED the think or swim mobile app, just make an account you dont need to deposit money.

As you can see, IV spiked hard at open (this happens almost always.) You don’t want to buy here because youll overpay for premiums. Watch the IV indicator and look for a plateau, then get those contracts.

As you can see here, IV increased for the entire rest of the day. Even though the stock went up, those puts DID NOT change price at all.

Okay, so how do we pick strikes? Well, we need to stay delta neutral. We don’t care about what the underlying does, we just need strikes that are very similar in delta.

When I took my HOOD strikes, I went with 8.5p which had a delta of around -0.15, and 12C had a delta of about 0.16 If i recall. Also to note, these strikes had the highest OI and volume from the previous day.

Now that we are delta neutral, at the very least we will break even, although I have yet to see that happen. IV went up so much that it greatly overpowered theta, it didn’t even have an affect on the contracts.

Here is another example with MFST:

IV spike at open, so wait 5 minutes to buy in. Then pick your delta neutral contacts.

Last example, sorry no pictures lol. But for playing FB I took 100P (highest volume and OI with a delta of -0.002 and 250C with delta of 0.0022.

OTM strikes generally seem scary, and it makes sense. But the reality is with these IV plays, the OTM strikes do not move much from change of the underlying, BUT they heavily benefit from IV increase. Sell that shit before close and make your money.

One more thing, I typically sell half my position during the mid morning IV peak. It falls off for awhile and then in the last 90 minutes it greatly picks up again. This week I might look to add more in the last 90 minutes.

Here are my plays for next week list in order of favorite.

Monday-
1.Pfizer
2. Avis Budget Group

Tuesday-

1. AMD (biggest play of the week imo)
2. Lyft
3. Sbux
4. Airbnb
5. Moderna

Wedesnday

1. Shopify (maybe actually the biggest play)
2. Wayfair

Thursday

1. LUCID
2. FUBO
3. DKNG

Once again, the day before earnings I will carefully review the option chain and decide whether or not im playing these. I’ll also be posting the strikes i am taking before earnings in this thread.

Hope this helps anyone and please ask questions or clarifications on anything

[Ryndir]

Update to Mondays plays:

CAR: has abysmal OI and volume. Most likely counting this one out.

Pfizer: Option chain is looking stacked already. Most definitely a play Monday morning.
Current strikes I will take are -

43.5P with Delta of 0.1015 (9000 OI)
53C with Delta of 0.1363 (4228 OI)

This is subject to change of course tomorrow morning if deltas change and we get new OI numbers. Will update premarket.

As I said you want to get deltas as similar as possible, but more importantly is volume and OI. I could’ve taken 53.5C and got perfect deltas, but there is literally zero OI on that strike.

[AlexanderJRL]

This is a really useful guide, thank you!

Do you know of any thinkorswim alternatives that work well for IV accuracy? I can’t open an account from outside the US but I’d like to try this properly.

[Ryndir]

Unfortunately not I have looked everywhere and TOS is the only accurate implied volatility reader. It nails it everytime.

That being said, without fail IV pumps and then drops in the first 5 minutes. That’s when you make entry’s. Everyday this week I’ll post a picture of the IV drop and when I make my entry’s for each play.

[rexxxar]

This is cool! Glad to see more folks writing about this.

[Ryndir]

Thanks Rexxar! Really looking forward to this week. FOMC is on the same day as SHOP earnings. Big volatility, big money to be made on a strangle.
I’ll be posting all positions the morning before market opens.

[rexxxar]

Cool beans. I announce my strangles at least 1 day before binary event as well.
This is my most profitable strat so far, no losses, and I only gain much less due to fat fingers.
Tested it for months, and have been posting results on my thread for at least a month now.
I’d love to see more of us use this as one of the safest ways to grow capital.

[thots_and_prayers]

Is the 53 a call?

[Ryndir]

Yes that’s right! I went ahead and edited it. Depending on OI tomorrow and new deltas these may be subject to change but I’ll be posting in premarket my plan.

[thots_and_prayers]

Awesome, figured it was a typo

Thank you for putting this together! It’s super informative

[Colin_Noskopy]

Thank you for this. I’m in on PFE tomorrow to give it a shot. Looking at AMD, how far OTM do you look? There is a fair bit of OI on Calls between $93-$102 with the closest Puts with corresponding Delta’s being the $80P or the $75P… would I be correct in assuming the $100C & $75P best fit your model? Thanks again.

[thots_and_prayers]

CHGG for tomorrow has huge IV it looks like.

[Ryndir]

Sounds good man! PFE will be great tomorrow.
As far as AMD, I won’t consider any positions until tomorrow after close, and then I’ll finalize my positions based on deltas that morning.

What you want is the farthest OTM contracts with the most volume and OI.

OTM strikes are not going to be affected much by the underlying asset movement. But heavily affected by IV. You can see that in the HOOD play.

Puts didn’t move in price, meanwhile calls went up 120%. This was also on a Thursday, so IV completed overpowered theta.

I will 100% be updating my final PFE strikes I’m taking tomorrow morning with deltas. I’ll also post when the morning IV dip is complete for those who don’t have access to think or swim app.

I’ll do the same for AMD on Tuesday pre market!

[thots_and_prayers]

Just FYI, according to @swoleappa PFE doesn’t have a lot of IV change.

[Colin_Noskopy]

Got it! Great info. Thank you for teaching me this.

[Ryndir]

True. Some plays might only be a 15-20% gainer, some 100%. I didn’t expect MFST to have big IV increases, but it still netted a 35-40% gain.

As far as CHGG goes, it could be a play but they only have monthlies.

I tried to play JBLU last week which also only had monthlies and IV barely moved. JBLU was about a 5% gain.

If you do play it I’d love to hear how it goes!

At this time I’m only sticking to same day earnings plays.

[swoleappa]

Appreciate you writing up this info @Ryndir !

If I were to choose two to play, my top would be $mrna and $shop

PFE is a pretty stable boomer stock and doesn’t really do much in general, let alone on ER.

That being said, if you’re that confident in your theory then I say go for it. The gains you listed are awesome, and a great example of how to play ER the right way.

[Ryndir]

Thank you Swole! Even if PFE is a small 15% gain I’ll take it.
I’m just aiming for whatever has the highest OI and volume.
I’m particularly excited for SHOP because it’s same day as FOMC. Volatility central

[jjcox82]

This is a great thread and topic. These have continuously been solid plays although I’ve never approached the strangle method which actually seems to be the way to approach these. As you don’t get hurt if underlying breaks one way or other. The IV gains on the earnings plays have been consistent positives with almost zero downside unless market gets goofy. But to your best point of all sell before EOD. I like LUCID this week for some ER gains cuz retards are gonna retard and that’s the most important part of the earnings play I feel like. Again great post and points.

[Naked]

I’d like your thoughts on ROKU last week, which was my biggest loser doing this strategy last week. The issue is the market went up a lot that day, so the IVs mostly dropped throughout the day

Chart 1: An OTM Call

As you can see it plateaus fairly early, which makes you think that’s a good entry, but then the IV drops and keeps dropping throughout the day. It does spike towards the end but not quite enough to recover all of it.

Chart 2: An OTM Put

So the put is also similar, the vol slowly climbs then falls off a cliff then stays down and declines more. It does spike towards the end of day.

(I know this particular set of options isn’t delta neutral, I’m just pulling a couple of them to look up their IV charts).
Another issue I had was the fact that there was a heavy skew where the OTM puts had much higher IV than OTM calls, so the fact ROKU moved up during the day meant you lost more premium on the higher IV puts than you gained on the lower IV calls.