Longer Dated Double Calendars for Earnings
Does anyone like using double calendars with longer dated contracts to play earnings?
Sell the week of earning's where IV is highest, buy a month out where IV is much lower, selling disproportionate IV getting now cheaper plays to hold through earnings for the anticipated move. For example:
- AVGO $155 before last earning's so bought monthly $140/170, sold weekly $140/170.
- Price dumped to $140 for two weeks so sold two weeklies at $140 collecting premium.
- Opened $155 after ER so the $140p wouldn't lose their profit if price ran up/moved against.
- Price then ran to $170 putting the $155 in profit, started selling $170s side (never closed) took assignment $177.5 a month later after earning's.
This is last AVGO earning's, the goal is to start selling weeklies for premium after the move, receiving much higher premium selling ATM than before earning's when was OTM. If strikes are breached, roll up and out with the plenty of time still available, allowing long legs to build intrinsic value and keep generating premium by selling time/weeklies.
The risk is price moves against but if reopening on other side after the move like with $155 example, possibly using a calendar and then rolling up and out if strike breached, the profit from the initial ER's move won't be lost even if price moves against. Almost like a collar, while also trying to keep selling for premium & build intrinsic value anywhere possible.