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Index
Preface
Part I Introduction
Chapter 1 Earnings Announcements: Opportunities and Risks
Earnings Announcements: Major, Recurring Events
Market Reactions to Earnings Announcements
Earnings Surprises
Market Reactions to Earnings Surprises Are Full of Surprises
Endnotes
Chapter 2 Option Strategies for Earnings Announcements: An Overview
Why Options?
General Considerations When Designing Option Strategies
Strike Price
Expiration Date
Timing of Trades
Classifications of Option Strategies for Earnings Announcements
Directional Trades around Earnings Announcements
Volatility Trades around Earnings Announcements
Longing Volatility
Shorting Volatility
Volatility Trades before Earnings Announcements
Directional Trades after Earnings Announcements
Chapter 3 Liquidity Risk: Bid-Ask Spreads
Measurement of Liquidity: The Bid-Ask Spread
Distribution of Absolute and Percentage Bid-Ask Spreads
Calls
Puts
The Impact of Different Bid-Ask Spread Assumptions on Performance
How Do Bid-Ask Spread Assumptions Impact the Returns of Calls?
How Do Bid-Ask Spread Assumptions Impact the Returns of Puts?
The Takeaway
Endnotes
Appendix
Part II Option Strategies for Earnings Announcements: Let the Data Speak
Chapter 4 Bullish Directional Trades
Long Calls: The Baseline Case
Short Puts: The Baseline Case
Time Series Analysis
Turning the Dials
Out-of-the-Money Options
Further Expiration Dates
Increasing the Holding Period
Thought Experiment: Knowing Earnings Announcement Returns
The Takeaway
Endnotes
Appendix
Chapter 5 Bearish Directional Trades
Long Puts: The Baseline Case
Short Calls: The Baseline Case
Time Series Analysis
Turning the Dials
Out-of-the-Money Options
Further Expiration Dates
Increasing the Holding Period
Thought Experiment: Knowing Earnings Announcement Returns
The Takeaway
Endnotes
Appendix
Chapter 6 Long Volatility Trades
Long Straddles: The Baseline Case
Long Strangles: The Baseline Case
Time-Series Analysis
Turning the Dials
Further Expiration Dates
Increasing the Holding Period
Thought Experiment: Knowing Absolute Earnings Announcement Returns
The Takeaway
Endnote
Appendix
Chapter 7 Short Volatility Trades
Short Straddles: The Baseline Case
Short Strangles: The Baseline Case
Time-Series Analysis
Turning the Dials
Further Expiration Dates
Increasing the Holding Period
Thought Experiment: Knowing Absolute Earnings Announcement Returns
The Takeaway
Endnote
Appendix
Chapter 8 Buy Volatility before Earnings Announcements
Buying Volatility before Earnings Announcements: The Baseline Case
Time Series Analysis
Turning the Dials
Further Expiration Dates
Increasing the Holding Period (or Entering the Position Earlier)
Thought Experiment: Knowing Absolute Pre-Earnings Announcement Returns
The Takeaway
Endnote
Appendix
Chapter 9 Ride the Post-Earnings-Announcement Drift
Post-Earnings-Announcement Drift in Stock Prices
Options Strategies for Post-Earnings-Announcement Drift
Bullish Directional Trades
Bearish Directional Trades
Time Series Analysis
The Takeaway
Appendix
Part III Advanced Analysis: Improve the Odds of Winning
Chapter 10 Implied Volatility
Implied Volatility and Absolute Earnings Announcement Returns
Implied Volatility and the Performance of Long and Short Straddles around Earnings Announcements
The Evolution of Implied Volatility around Earnings Announcements
The Takeaway
Appendix
Chapter 11 Historical Earnings Announcement Returns
Historical and Future Earnings Announcement Returns
Historical Absolute Earnings Announcement Returns and the Performance of Long and Short Straddles around Earnings Announcements
The Takeaway
Endnote
Appendix
Chapter 12 Market Capitalization
Market Cap and Absolute Earnings Announcement Returns
Market Cap and Performance of Long and Short Straddles around Earnings Announcements
The Takeaway
Endnotes
Appendix
Chapter 13 Valuation
Valuation and Absolute Earnings Announcement Returns
Valuation and Performance of Long and Short Straddles around Earnings Announcement Returns
The Takeaway
Appendix
Chapter 14 Industry Effects
Industry Classifications
Absolute Earnings Announcement Returns by Sector
Implied Volatility by Sector
Performance of Long and Short Straddles around Earnings Announcements by Sector
The Takeaway
Endnote
Appendix
Chapter 15 Enhanced Strategies
Enhancing the Volatility Strategy: A Two-Factor Model
Long Straddles
Short Straddles
Further Enhancement
Historical Absolute Earnings Announcement Returns
Valuation
Industry Membership
The Takeaway
Endnotes
Index
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