A Real-Life Example Let's say Caterpillar (NYSE: CAT) stock is trading for $210 and the company is scheduled to report earnings on August 15. You could establish a $3 earnings strangle by buying the following options... - Caterpillar August $211 calls expiring on August 20 for $1.50
- Caterpillar August $209 puts expiring on April 20 for $1.50.
Prior to the earnings release, you won't know whether Caterpillar will beat earnings or disappoint. However, you do know that as long as the stock moves at least 5% on earnings day - up or down - you will turn a profit on your strangle position. Let's say Caterpillar surprises with strong earnings and the stock jumps from $210 to $227 - an 8.1% gain. In turn, your calls gain 367%, while your puts expire worthless. Altogether, your total trade moves up $7, good for a 133% profit. That's because the substantial gain from the calls far outweighs the small loss from the puts. Alternatively, if Caterpillar disappoints with weaker-than-expected earnings numbers and the stock falls below $210, as long as it falls at least 5%, you also make money on your trade! In the first two quarters of 2021, the following companies had an earnings reaction of more than 5%... And this is just a sample. There are dozens more! All of them would be winners with the earnings strangle strategy! Advantages Earnings strangles have distinct advantages... - You know the exact timing of every trade ahead of time. Every earnings announcement is scheduled in advance, allowing you to plan your entry and exit orders accordingly. This way, you'll never miss a trade.
- You have zero directional risk. While most traders look to predict the direction of a stock's post-earnings move, this strategy removes all of the guesswork. When you play both directions together, all you care about is the magnitude (again, not the direction) of the move. In the example above, if the stock moves 5% (or more) on earnings day, you win - regardless of whether that move is up or down.
- You don't need to act fast or trade quickly to get the best price. As long as the stock reacts enough to move the needle, the gains will be sustained throughout the session on earnings day.
- You can manage and allocate your capital more efficiently. Because you know the buy and sell dates in advance, you can anticipate what will be tied up in the market versus what will be available in cash. This way, you'll know how much to put into each trade.
In our experience, strangles are consistently the most profitable trading strategy around an earnings report. Make It Happen If you'd like to learn more about earnings strangles but could use some guidance, we're hosting a FREE War Room Open House from July 26 to 30! Tesla (Nasdaq: TSLA) announces earnings that Monday... and it is a tremendous opportunity to show people exactly what The War Room is all about. We'll show you how Pro Traders react to a major market event like Tesla earnings in REAL TIME. Will you see the chance to make 25%... 50%... or even double your money overnight? It's possible... but only if you join us for our Open House! Best of all... it's 100% FREE! You will be front and center, along with many other like-minded members, watching us discuss earnings strangles and other trading strategies... all LIVE. If this sounds exciting to you, then I invite you to join our special War Room Open House event, where you can get a taste of the trading life... Click Here to RSVP and Secure Your Spot (No Credit Card... No Obligation... No B.S.) Hope to see you in The War Room! Good investing, Bryan P.S. Still not convinced? Listen to real War Room members talk about their real one-day trades! Then, come see the gains for yourself! Click here to join our FREE War Room Open House from July 26 30! | 
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