Earning season is one of the most volatile and profitable times in the stock market. It presents a unique opportunity for options traders to capitalize on price swings driven by company earnings reports. However, trading options during earnings can be risky without the right strategy. This is where an Options Screener becomes an essential tool for filtering the best opportunities while minimizing unnecessary risks.
In this article, we’ll explore how to leverage an Options Screener to identify high-probability trades during earnings season and discuss key strategies to maximize your success.
Understanding the Role of an Options Screener in Earning Season
An Options Screener is a powerful tool that helps traders filter and identify options contracts based on predefined criteria such as implied volatility, open interest, delta, and more. During earnings season, stock prices often experience significant fluctuations, which makes screening for the right opportunities crucial.
Key Metrics to Use in an Options Screener During Earnings Season
When setting up an Options Screener for earnings trades, consider the following key metrics:
- Implied Volatility (IV) – Look for stocks with high IV, as they tend to have larger price swings. However, be cautious of IV crush after earnings.
- IV Rank & IV Percentile – These help compare the current IV to historical IV levels, ensuring you are trading in the best conditions.
- Open Interest & Volume – Higher liquidity ensures better trade execution and tighter bid-ask spreads.
- Earnings Date Proximity – Screen for stocks with upcoming earnings in the next few days or weeks.
- Straddle/Strangle Price Expectation – Identify stocks with options pricing that reflect a significant earnings move.
- Delta & Theta – Use delta to gauge the probability of an option expiring ITM and theta to assess time decay.
By filtering options based on these metrics, you can create a shortlist of stocks poised for a strong earnings-driven move.
Top Options Screener Strategies for Earning Season
1. The Pre-Earnings Volatility Play
Objective: Capture the increase in implied volatility before earnings are released.
- Use an Options Screener to find stocks with earnings announcements scheduled in 7-10 days.
- Look for options with high IV Rank (above 70) but still rising.
- Enter long volatility trades (buying straddles or strangles) before the earnings report is released.
- Exit before earnings to avoid IV crush.
Example: If XYZ stock has earnings in 8 days and IV Rank is 75, buying a straddle at-the-money (ATM) can profit from increasing IV as the event approaches.
2. The Post-Earnings IV Crush Strategy
Objective: Profit from the drop in implied volatility after earnings are announced.
- Screen for stocks with earnings reports released within the last 24 hours.
- Look for stocks with significantly reduced IV compared to pre-earnings levels.
- Sell options strategies like iron condors, credit spreads, or covered calls.
- Focus on stocks with stable price action post-earnings to maximize time decay.
Example: ABC stock had earnings yesterday, and IV dropped from 90 to 40. Selling a credit spread can take advantage of the IV drop and time decay.
3. The Directional Earnings Trade
Objective: Take a directional bet on a stock’s earnings outcome.
- Use an Options Screener to filter stocks with strong earnings trends over multiple quarters.
- Look for unusual options activity, such as large call or put buying.
- Enter a directional trade (buying calls for bullish sentiment, puts for bearish sentiment).
- Consider risk-defined strategies like debit spreads to manage risk.
Example: If DEF stock has beaten earnings expectations for the last four quarters and has high call volume, buying a call option can be a smart move.
4. The Earnings Mean Reversion Strategy
Objective: Trade a reversal after an overreaction to earnings.
- Identify stocks that have moved excessively post-earnings (up or down by more than 10%).
- Look for RSI or Bollinger Band signals indicating overbought/oversold conditions.
- Enter a contrarian options trade such as a short strangle or a credit spread.
Example: GHI stock drops 15% post-earnings but has strong fundamentals. Selling a put spread can take advantage of a likely rebound.
5. The Unusual Options Activity (UOA) Play
Objective: Follow smart money by tracking unusual options activity before earnings.
- Use an Options Screener to detect unusual call or put volume that is significantly higher than the average.
- Compare this with historical data to see if it indicates insider or institutional positioning.
- Enter a trade aligned with the direction of UOA, but with proper risk management.
Example: If JKL stock normally has 1,000 call contracts traded daily, but suddenly sees 15,000 contracts before earnings, this could signal a potential move. Entering a call spread could be a strong play.
Risk Management and Best Practices
Trading options during earnings season is exciting, but it carries risks. Here are some best practices:
- Avoid over-leveraging – Stick to risk-defined strategies like debit and credit spreads.
- Be aware of IV crush – Selling high IV options can be profitable, but buying them near earnings can be costly.
- Use stop-loss orders – Avoid large losses by setting exit points.
- Diversify earnings trades – Avoid concentrating all trades in one sector.
FAQ on Options Screener Strategies for Earning Season
1. What is the best options strategy for earnings season?
There is no single best strategy, but popular ones include pre-earnings volatility plays, post-earnings IV crush trades, and directional bets based on earnings trends.
2. How do I avoid IV crush when trading earnings?
To avoid IV crush, close long volatility trades before the earnings release or use spreads to offset potential losses.
3. What’s the safest way to trade options during earnings?
Using risk-defined strategies like credit spreads or iron condors minimizes exposure while still allowing profit potential.
4. Can I use a free Options Screener for earnings trading?
Yes! Many platforms offer free screeners, but premium tools provide better customization and insights.
5. Which platform offers the best Options Screener for earnings trading?
TradeVision is an excellent choice for finding the best options setups during earnings season. With advanced filtering tools, real-time data, and intuitive analytics, TradeVision helps traders make informed decisions with confidence.
Conclusion
Earnings season presents both risks and rewards for options traders. By using an Options Screener, you can identify the best opportunities and trade strategically while managing risk. Whether you’re looking for pre-earnings volatility plays, post-earnings IV crush strategies, or directional bets, a well-optimized screener can be your edge.
For traders looking for a robust and efficient options screening tool, TradeVision is a top-tier choice. With its advanced features and user-friendly interface, it can help you navigate the volatility of earnings season like a pro.
