Earnings Season Options Playbook (2): Long-side Strategies

In our previous post, we introduced three useful tools on moomoo that help investors read the pre-earnings options setup—so you can better judge whether it makes more sense to be an options buyer or an options seller. Starting from this episode, we’ll go step-by-step on how to build earnings strategies on buyer and seller.

This post focuses on buyer strategies. Next episode, we’ll cover seller strategies.

First of all, a hard truth: buying options into earnings is usually a bad “game”, with low win-rate, low payout. From a game-theory perspective, if a strategy has both a low probability of success and an unfavorable payoff, it should be discarded.

Take Oracle as an example: last September, ORCL surged 35% after earnings, and an investor who bought near-expiry options reportedly scored a 10x return. Survivorship bias makes investors fixate on these rare jackpot outcomes—while ignoring the much larger crowd of silent losers.

As the saying goes, a victory is built on countless losses.

So, here comes the question: Apart from the emotional-impulsive trades, from a rational perspective, is there any practical way to improve the odds of success when buying options to bet on earnings?

Yes.

There are two ways to meaningfully improve the odds for earnings-buyer setups: (1) Pick the right stock, (2) Pick the right options.

If your goal is to find a stock that can move up (or down) and exceed the market’s implied move, you must start with valuation.

Generally speaking, buying upside into earnings is safest when the stock is already at depressed valuation levels.

A classic example is Microsoft in late April 2025. At that time, both MSFT’s price and valuation were relatively low—and the earnings results beat expectations. That combination kicked off a strong trend leg higher.

MSFT’s April 2023 (Q3) earnings had a similar setup. Readers can review the tape—we won’t repeat the full case study here.

Often, what truly drives the post-earnings reaction isn’t the reported EPS/revenue, but management’s outlook for the next cycle—what traders jokingly call “painting the future.”

If the quarter itself is merely “fine,” but expectations were already low, then a strong guide / confident forward commentary / big commitments can still lift the stock materially.

A representative case is Tesla in late October 2024. TSLA had already suffered a prolonged selloff, leaving price and valuation at relatively low levels. The reported results weren’t spectacular—yet Musk delivered extremely optimistic forward messaging, and the market also started pricing in major political tailwinds after Trump’s win and Musk’s rumored leadership role in a “government efficiency” initiative. That combination ignited TSLA’s explosive Q4 rally that year.

Earnings downside bets tend to work best when a stock has been aggressively bid up into the print—i.e., when it’s “priced for perfection.”

The freshest example: Intel’s post-earnings drop of 17%. The quarter itself wasn’t a disaster, and management’s tone wasn’t even particularly negative. The selloff happened for one dominant reason: the stock had run too far pre-earnings, making valuation look expensive relative to fundamentals.

A similar case: Dell in late May 2024. The market was chasing the “AI infrastructure” theme, and Dell—via servers—was viewed as a key supplier alongside names like SMCI. The stock ripped higher, and pre-earnings forward P/E was pushed to roughly 50x. After earnings, the stock crashed 17% in a single day—arguably even more extreme than Intel’s move.

A stock sitting near highs does not guarantee a post-earnings drop. Examples include Google in late July 2025, Broadcom in early September 2025, and even STX (which just reported yesterday).

If the stock is high but valuation isn’t absurd—and management upgrades the forward outlook—there can still be room for “new highs after highs.”

That said, in these situations, the “easy upside” may be largely captured. The stock can transition into high-level consolidation rather than a clean continuation run.

Finally, if a company is stuck in a fundamental + price downtrend spiral, and it has already suffered one (or several) major post-earnings selloffs, don’t casually “buy the dip” into earnings.

Since 2025 began, LULU has suffered three consecutive post-earnings crashes. Each time, the stock looked “cheap” pre-earnings and valuation didn’t appear expensive.

But because the business was contracting, each report effectively forced the market to re-rate the stock lower, creating a vicious loop:

Adobe shows a similar pattern: repeated earnings-driven selloffs since January 2024, and the stock still hasn’t convincingly escaped the negative feedback loop.

To improve earnings-buyer odds, stock selection isn’t enough. Option selection matters just as much.

We all know the brutal truth about buying short-dated options into earnings: to make money, you generally need:

1. Direction correct, and

2. AM > EM (the realized post-earnings move exceeds the implied move)

Both are hard.

So is there a way to choose options so these conditions become less strict?

Yes—two core levers:

1. Extend duration (avoid near-expiry lottery tickets)

2. Choose strikes intelligently (ITM vs OTM)

If you want a higher probability of success, avoid same-week / next-day options and extend the term of options.

Extending the term helps in two ways:

1. More time value buffer → less vulnerable to immediate decay (“more durable”)

2. More flexibility → you can wait out noise and let the trade develop

Sometimes, the first post-earnings reaction of share price is WRONG. In which case, a long-termed call options can endure the "WRONG" period, while a short-termed one will fail.

For example, IBM last April gapped down about 7% after earnings, then rallied hard over the next two months. It took about two week for the price the reclaim the pre-earnings level, during which an long term option (e.g. with 2~3 months expiry) could survive while short term one (e.g. weekly) couldn't.

Many investors believe that “earnings gambling = buy OTM options,” because OTM options are cheap and offer huge leverage.

That’s a myth—or at least an over-simplification.

Yes, OTM options offer explosive convexity when the stock makes a violent move quickly. But OTM premiums are often pure time value, highly sensitive to vega. After earnings, you frequently get an IV crush, which can collapse the option even if the stock moves in your direction.

If the post-earnings rally is gradual rather than immediate, time decay on an OTM option (theta effect) can outpace the gains on stock price rising (delta effect).

By contrast, ITM options contain meaningful intrinsic value, which makes them far more defensive. Even if the realized move is smaller than the implied move, the extrinsic portion you lose may be limited. You also have the flexibility to keep the position and ride a trend if it develops over days or weeks.

So the conclusion is: for earnings trades, OTM and ITM both have strengths and weaknesses. The correct choice depends on the setup and your plan.

Have you noticed that right at the post-earnings open, the stock can whip around violently—prices flash by in a split second—and you simply can’t catch the perfect moment to close your options?

Take the latest “crazy stock” Palantir as an example: it gapped up +11.7% after earnings, but by the close the gain had already shrunk to a measly +6.85%, and the next day it dumped -11.6%. In other words, if you don’t close your long calls immediately at the open, your profits can get eaten away—until you end up turning a winner into a loser.

Use the Options Calculator to estimate the post-earnings option price, then execute with a Touch Orders (Market-if-Touch / Limit-if-Touch).

Let’s use a the latest case: Google’s earnings sparked a big rally in Broadcom. Suppose an investor bought Broadcom nearest OTM call options right before yesterday’s close—expiring this Friday (Feb 6)—for about $6.6.

Investor can use the Options Calculator to compute the option price corresponding to the expected underlying price—getting $17.67. Assuming implied volatility doesn’t change dramatically, this could be roughly the option’s price right after today’s open.

Now comes the magic moment: set this value as your trigger price, so you can potentially close the position immediately at the open and lock in the gain. If you’re worried the price is too “choppy,” you can round it (e.g., $17.5).

For the two orders above: Left is a market order (placed automatically after the trigger). Once triggered, it aims to fill immediately at the market price. The trade-off is that the fill price may not match your ideal expectation. Right is a limit order (also triggered automatically). It will only fill if the order book meets your limit price—so the price is controlled, but the risk is not getting filled.

Hope this combo helps you trade earnings-season options more efficiently and capture those blink-and-you-miss-it exits!

Since buying options into earnings is typically a low win-rate / low payoff game, how can you improve your odds?

A) Better stock selection and timing

B) Smarter choice of expiration and strike

C) Both A and B

(1) True

(2) True