r/options
Adobe $ADBE earnings tonight after the bell. Play the Move or the Vol Crush?
Author plans to trade ADBE's post-earnings volatility, citing historical moves exceeding implied expectations and high EV.
- Historical post-earnings price moves frequently exceed the market's implied expectations.
- Asymmetrical risk profile provides high expected value if the stock experiences a major outlier move.
- A rapid implied volatility crush could offset gains if the position is not exited quickly.
- The strategy inherently carries a 50/50 win rate, indicating a significant probability of loss.
I'll be playing the move. Here's my logic.
- $ADBE has a history of moves post announcement greater than options trader expect.
- Market is implying a 7.4% move. It's also projecting a vol crush of nearly seven points. The historical median move is 5.3% with a standard deviation of 8.3%. With 68% CI, the expected move is +/-13.6%. Factoring in vol crush, I'm going to need to get out before it's fully realized. Otherwise, the crush will overcome the implied move.
- I'll put the trade on (defined risk IC) going into tonight's close and exit in the a.m. post price discovery, \~ 9:45.
- This one is an edge case, so I'm fully prepared to take a loss. However, this earnings season there have been some major outliers, so if this one runs, expect it to run big.
- With an asymmetrical position, I like this trade's high EV, even though expected win rate is no better than 50/50.
After today, there's only a few EA plays left until the Q2 earnings season kicks off middle of next month.
Happy trading!
my god what an asshole lol
nor for the civilized it seems
Someone pass the popcorn please
So now you are near max loss, how do you expect to exit this position in the morning?
Roast himmmmm
easy - wait until the open when my puts are deep ITM
flexing on a coin flip is hardly as cool as you think it is
that coin flip turns up heads 35% of the time. 2 long vol trades in 2 day. 2 winners. 12.25% chance of that being luck, so yeah you could be right.
But you sure as hell were wrong with pretty much your every comment on this thread. A perfect 100% wrong - that's an even more impressive accomplishment - no luck needed!
Still waiting to hear how you trade. Or are you just a troll, and not a very good one at that?
I think it's possible to both accept and provide feedback and to explain the reasoning behind these decisions in a way that's objective without coming across as a complete dick. my issue to be clear was with the OP's response to your criticism, but if you are of the opinion that feedback can only be delivered by talking like an asshole then no wonder people don't want it
After seeing this post a few hours ago, I had even more confidence to buy a $200 Put 02 July, Now i’m up big thank you🙏🙏
actually, im going to put 10k into this drop after hours to try to keep it above your breakeven of 207.5 for this comment
well, now your condor is really fucked, you will hit max loss or breakeven at best
aw shit man your stock is barely moving post announce, you okay?
You're right. I just draw a pretty graph and place my bets. Thanks for your contribution to the conversation.
Well, if I must be honest - and can be an asshole, since you want to be an asshole to everyone else (don’t worry I can certainly be an asshole, too, so no judgement) - your “graph” isn’t very pretty. Terrible color selection. Also who uses CC moves? Especially for earnings you close within 30 min. Or even speaks about options in % moves? It’s vol points everywhere I’ve been, brother. I guess you do have some notion of gap, though. Congrats! Anyways, your trade expression is very unclear. Muddy at best. You speak about moves being underpriced in some sense (CLEARLY driven by the extreme outliers in your chart…which is important later), which would be best expressed via straddles. Then you talk about convexity which is very different…you’re talking about the tails relative to the meat of the distribution…Volga. That’s what actually driving your calculation of cheap implied move (you have extreme values in a pure variance calc/conclusion). Ok so the mean move is ok but the tails are too cheap…not what you said (or understood) so then why not use flys? You use ICs which are a mix of Vega and Volga (variance and convexity to be super clear) and essentially say “mean is fairish, tails are expensive, in between is cheap.” Which like doesn’t at all line with anything you’ve presented; not that there’s anything wrong with ICs in general. Your expressed idea just doesn’t line up with the structure very well. And you can’t really seem to decide if it’s the mean or tails that are cheap.
You're right. In a 5 paragraph reddit post I laid out my every thought/decision making process so you are in a very good position to understand and critique my approach.
And BTW, every paid data source I've seen (Unusual Whales, etc.) displays CC moves. If you know of a source that has otherwise, please lmk, I'd appreciate it.
But time to go - I have some ITM puts to sell for a nice profit.
It certainly ran like you said it would but, in the wrong direction...
As with ORCL, it won't move enough to have a profitable trade, unless you buy very close to the money.
playing the move on ADBE earnings the thing that gets people is the crush isnt gradual, it hits at the open all at once, so theres no waiting it out. your long premium gets repriced at 9:30 and the gap move has to already beat the iv reset or youre underwater even if you called direction right. ADBE does have that history of bigger moves than implied like you said, but it also tends to drift over the next day or two and a long straddle cant really use that drift because the crush already front ran it. if youre long the move you almost have to take the open print and not get cute. whats your plan if it gaps only like 3 or 4 percent, cut at the open or hold for the drift?
pepper your angus my man
options trading on earnings is always a binary gamble
there is no real edge
but best of luck against the market makers here with all this macro shit going on, a bold move
Disagree - and academic studies show otherwise. And MM don't have the skillset/data to place odds on earnings moves, so I'm not trading against them.
But thanks for the best wishes!
lol yes they do, they almost always call it correct with the ATM straddle price
and then post earnings they pin the shares where they need to, erasing any gain you had pre event or placing your risk/reward well out of line if you even make a profit
Retail has zero edge other than a gamble, if you believe otherwise you are fucking retarded, you have better odds at a roulette table
lol - wrong showing your ignorance my man. 65% of straddles are overpriced???!! Hardly "almost always"
But best of luck to you and your trading, which by your obvious high IQ, must be quite remarkable. Please share!
I think that the real problem with earnings plays is, that nobody actually checks what happened the last 20 times that specific ticker moved like this. $ADBE beating the implied move is a real pattern but it goes both ways. The verified history is the only honest input you have, everything else is noise. Don´t you think?
You don't think there is any information content in the vol crush number? Or the vol surface? Or any other of the dozen or so inputs to my model?
Vol crush number 😂. Your model sounds about as stupid as anyone believing you studied under Fisher Black at MIT…which would’ve been like 50 YEARS ago. Bro. Come on.
Thanks for your insightful observations and invaluable contribution to the discussion.
just curious - how did your trade work out? Mine made bank.
good luck running The Wheel!