Selling Naked Options Before Earnings Announcements

I prefer selling out-of-the-money naked options before earnings announcements. The reason is that the implied volatility of every option is at it’s highest levels and options become overpriced (rich in premium). After earnings announcement the market maker will slash the premium and profit can still be had even though the direction or bias of your trade is wrong. If you’re starting out keep your trades small. To trade naked options you will need to open up a margin account. Margin requirements are high for this type of trading but you have the advantage of selling overvalued options before you buy them back. Another advantage is OrangutanTrader will furnish you with 40 to 100 stock directional bets to trade every month. You will liquidate your trades the following day. For example, say you capture 50% of the premium of $500 trades and have 40 trades per month – that’s a nice trading business generating $10,000 per month with little time in the market.