given nvda earning is coming up, here is a quick guide on how a few common long vol strategies performed over the past 4 earnings as a baseline. i basically ran a few backtests that assume we buy the options 15 min before market close prior to the earnings, and sell right after open the next day.
the strategies I want to look at are straddle / long call / long put (i.e. all pretty accessible / easy to trade).
first with long straddle, its pretty surprising that owning the straddle has been a loser every time. if you put 100k each time, you will end up losing ~39% overall. seems like vol selling (e.g. covered call or cash secured puts have fared much better). implied vol is pretty bid up for the event.
now lets take a look at how buying calls performed. I tested buying calls at 0.1/0.2/0.5/0.7 delta, and only the 0.7 delta had a small positive return (barely). Even though stock is was up most of the times, the IV crush still caused the options to decrease in value overall (the higher delta options has a smaller percentage in time value so suffer less from IV crush as a percentage).
same thing for puts (as expected given long straddle lost money), and the loss is even worse (as it suffers from both IV crush and stock price increase). here's on example with the -0.5 delta:
let me know if you want me to add other symbols or strategies into the backtest and good luck tmr!
source: tensorfi.ai/events
* not financial advice. mainly want to shed more lights on how strategies historically performed so ppl can be more informed before betting
nvda earnings options performance over the past year (spoiler: straddle has been a loser everytime)
byu/tensorfi_ai inoptions
Posted by tensorfi_ai
4 Comments
I’m looking forward to the ‘I bought calls and nvda is up 10% how did I lose money’ posts
this is cool but i’m having trouble finding the site lol
DENNYS is a better play – it’s the birthplace of Nvidia!
The best way to trade earnings is to buy your spreads a few weeks before the report, when iv’s are low, then catch the iv increase running up to the earnings date, and exit the day of the ER.