Why Investors Should Trade Options Around Earnings Announcements

John Shon · Ping Zhou

mar. de 2011 · Pearson Education

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This Element is an excerpt from Trading on Corporate Earnings News: Profiting from Targeted, Short-Term Options Positions (9780137084920) by John Shon, Ph.D., and Ping Zhou, Ph.D. Available in print and digital formats.

Two Line Description

How to trade options before earning announcements — and profit whether the market raves or rages!

Text Excerpt

We’ve all seen perplexing market reactions to earnings announcements, but would you have guessed that this happens 40% of the time? Even if you predict the right direction of an earnings surprise, it’s still easy to lose money with a directional bet. So how can you profit from an earnings announcement? You use an options trading strategy called a “straddle.”

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John Shon, Ph.D. is Professor in Accounting at Fordham University's Graduate School of Business. His awards for research on equity markets include the Outstanding Research Award at the Global Conference on Business and Finance Research, and Most Innovative Conference Paper Award at the Four Schools Summer Research Conference. He holds a Ph.D. in Accounting and MBA in Finance from the University of Chicago. Ping Zhou, Ph.D. , Vice President and equity portfolio manager of Neuberger Berman's Quantitative Investment Group, is an expert in portfolio theory, market anomalies, investor behavior, corporate finance, and risk management.