About – Earnings Volatility
Danielle will time the buying and selling of options going into earnings with rising and falling volatility in mind for best pricing.
Earnings Volatility
A great companion to the Earnings Hot Zone indicator.
Understand what the volatility trend is over the course of a quarter. Make reading vol easier.
Looking at the vol trend helps in options trading because sometimes you want to buy or sell different levels of volatility. The volatility trend helps give the trader high probability moments in time where you can input strategies in conjunction with the earnings calendar.
Rising and falling IV Rank:
Green – Low IV Rank
Buy low vol = cheap
Red – High IV Rank:
Sell high vol = expensive
Yellow – Average IV Rank
When trading a run into earnings, look for rising volatility and an entry in the volatility trend that is a pullback using the hot zone with the Earnings Hot Zone indicator.
The Earnings Volatility indicator helps time buying by staying away from an option when it is too expensive, and conversely know when options are likely priced in your favor (green).
Red indicates rising volatility and is a warning for traders regarding options pricing.
Labels
Two labels are a part of this study, IV percentile, and IV rank.
Color coded to show when volatility is rising, flat or going lower.
When vol is rising the color turns red (warning).
Implied Volatility (IV):
Displays an estimation of the volatility calculated by the price of an option on that stock. For example, if the market price of an option rises without a change in the price of the underlying stock, implied volatility will have risen.
IV Rank or Implied Volatility Rank:
Calculates the current level of IV relative to the IV high and low over a 52 week period. For example, if the current IV is 40, then the current IV Rank would be 50%, if over the last year the IV low was 20 and the IV high was 60.
In other words, compare IV on an apples to apples basis between tickers.
Earnings Report Vertical Lines:
Recognize when to get into a trade due to where volatility levels are and timing in relation to earnings. Track and time getting in on low volatility and get out on high volatility.
Danielle uses her Earnings Volatility and Earnings Hot Zone indicators in combination with the Trend strength Turbo candles, 8, 21 and 34 exponential moving averages, and the 50, 100 and 200 SMAs.