Unit 2 · Level 3 · Event trading
Earnings the pro way
Amateurs ask 'will the report be good?' Pros ask 'is the PRICED-IN move too big or too small?' If the straddle implies ±8% but this company rarely moves 4%, selling that richness (with defined risk!) is the trade. If it implies ±3% before a make-or-break quarter, owning optionality is. The event is the stage; the mispricing is the play.
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What you get asked
A pro's FIRST question before any earnings trade:
Direction is a coin flip you can't research your way out of; the gap between priced and probable movement is where a real edge can live.
You judge the expected move overpriced. The pro-shaped expression of that view is…
Selling naked into an event risks the account on one gap. The iron condor (from Options League 2) sells the same richness with the loss boxed in advance.
Put the professional earnings workflow in order
Surface first, structure second, size always. Notice direction never appears in the checklist.
Pros prefer ___-risk structures into earnings, because a surprise gap can't be stopped out overnight.
When the market is closed, a stop-loss is just a wish. The structure itself must be the risk control.
Why can't a stop-loss protect you through an earnings report?
A stock closing at €100 can open at €80. Your €95 stop fills at €80, if at all. That's why the pro answer is structure and size, not stops. 🐜
The rest of this unit
Expected moves, straddles and binary gaps: trading the calendar like a pro.