{"product_id":"stcov316exyo","title":"Stocks \u0026 Commodities V. 31:4 (61): Explore Your Options by Tom Gentile","description":"Explore Your Options by Tom Gentile\u003cbr\u003e\u003cbr\u003eDOUBLE SPREADS\u003cbr\u003e\u003cbr\u003eAt a recent seminar, I was asked what might\nbe the best way to take advantage of a stock\nthat drops after an earnings disappointment.\nI knew what stock he was talking\nabout Apple (AAPL). Just a week earlier,\nI had created a case study for AAPL just\nafter the earnings report. Heres a typical\npost-earnings drop on a big-name stock,\nas well as one strategy to look at trading\nwhen this occurs.\u003cbr\u003e\u003cbr\u003eTypically, post-earnings disappointments\nare not from good stocks. Companies\npost earnings outside of the daytime\ntrading sessions, usually announcing\nafter the market close or before the\nmarket opens. Often, this results in a\ngap occurring, as the stock will most\nlikely drop. Unless you want to trade\nthe after- or before-market sessions, as\noption traders we are limited to trading\nwhen the market opens in New York\nfollowing the announcement. Because\nafter- and before-market announcements\ngive us an idea of where the stock will\nbe trading during the next-day session,\nit gives us time to set up a strategy.\u003cbr\u003e\u003cbr\u003eTypically, the option market gets\nstirred up right before an important\nearnings announcement, and implied\nvolatility gets higher than average. After\nthe announcement, the next session will\nusually see the stock price move, either\nup (for positive earnings announcements)\nor down (for negative), but option\npremiums will most likely fall either way.\nBut there are rare occurrences when a\nstock drops, and the time premium in\noptions will not fall as fast. This presents\nan opportunity for the option seller. But how\ndo we sell premium and protect ourselves\nfrom unlimited risk? Spreading. And how\ndo we create a trade thats neutral in direction\nand risk? Double spreading!","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52133990039921,"sku":"V31C04_535EYO","price":2.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_892526c4-7aed-43aa-90c7-30f193d55518.jpg?v=1739660820","url":"https:\/\/shop.traders.com\/products\/stcov316exyo","provider":"Stocks \u0026 Commodities","version":"1.0","type":"link"}