Earnings Season Options Playbook (3): Short-side Strategies
In the previous posts, we analyzed strategies and key considerations for buying options for trading earnings. Overall, buying options during earnings season is generally a “low win-rate, low payout” game, which in theory is not very cost-effective.
That naturally leads to the next question: If we use options selling strategies to trade earnings, can we improve the win rate and make money more easily?
In theory, yes — but there are several traps you must avoid. 
In this post, we’ll break down how to use options selling strategies to trade around earnings.
1. Advantages of Being an Options Seller for Earnings
Options market makers tend to raise implied volatility (IV) pre-earnings to account for uncertainty. After earnings are released, IV typically falls back. This post-earnings drop in implied volatility is the well-known “IV Crush,” which naturally makes it easier for options sellers to make money.
Besides, for most stocks, the actual post-earnings price move (Actual Move, AM) often fails to exceed the implied move priced in by options before earnings (Expected Move, EM). This is one reason why buying options for earnings often gets traders wiped out.
Based on these two factors: (1) IV Crush, and (2) AM < EM, being option sellers during earnings tends to offer a higher win rate than being an options buyer.
Especially in cases where a stock delivers a post-earnings “double kill” (i.e., both call buyers and put buyers get punished), being a seller can feel much more relaxed.
A classic example of a post-earnings double kill was NVIDIA’s earnings last quarter. After earnings, the stock first gapped up 5%, then violently reversed lower and eventually closed down 3%, with an intraday range of as much as 8 percentage points.
In this kind of brutal two-way wipeout, option buyers get exhausted and torn apart, while sellers can almost feel like they’re just calmly watching the chaos unfold.
, while sellers can almost feel like they’re just calmly watching the chaos unfold.
So using options selling strategies during earnings does make it easier to survive — and even profit — than using buying strategies. The psychological pressure is usually lower as well.
However, there are still some minefields you need to avoid. And if the post-earnings price action develops against your expectations, you must stop out immediately.
Let’s break it down in detail.
2. Typical Option Seller Strategies for Earnings
In general, earnings-season options selling strategies mainly come down to two types:
– Short Strangle
– Short Put
As for short calls, it is generally more suitable when you already hold the underlying stock (i.e., a covered call context). A naked short call carries very high risk and is not recommended.
(1) Short Strangle
The goal of a short strangle is to capture the vega gains from the post-earnings IV Crush. There are two key points in constructing the strategy:
Act fast and exit fast — do not use overly long-dated expirations (usually no longer than 1 month)
Set strikes far enough away — to reduce blow-up risk
Investors can use Moomoo’s Strategy Builder function to experiment with different combinations.
Click the “Short Strangle” strategy to enter the configuration page. Investors can then view the expiration payoff curve. In the lower-left section, you can configure the expiration date and strike price for the two options.
In terms of expiration, it generally should not exceed 1 month. As for strike selection, it should not be done randomly. IV can be used as an important reference.
Generally speaking, every 16 points of IV corresponds to an expected monthly stock move of about 4.04%.
For example, if a stock has an IV of 48 (i.e., 16 × 3), that implies an expected monthly move of approximately 12.12%.
Since near-term IV before earnings may be artificially elevated, you may use the IV of a moderately out-of-the-money put expiring in 3–4 months as a reference value.
Suppose NVDA’s reference IV is 50. That would imply a monthly move of roughly 13%. Based on the current stock price, if you move up 13% and down 13%, you can determine theoretical call and put strike levels for the short strangle. (As shown in the chart above.)
In practice, investors should stay flexible and choose the safest strike levels based on their own judgment of market conditions.
(2) Short Put
Deploying a short put before earnings allows you to potentially profit from:
– vega gains from post-earnings IV contraction, and
– delta gains if the stock rises
Even if the stock declines slightly, the gains from IV contraction may partially offset the loss from the stock move.
As long as the stock does not experience a sharp crash, using a short put to trade earnings can generally pass safely.
Of course, if the stock’s valuation is not high before earnings, and the strike can be placed near a valuation floor, then the margin of safety for the short put becomes even larger.
Use Nvidia as a example. Wall Street currently expects around $7.5 EPS for 2026. At the current stock price, that implies a P/E of about 25.6x, which is not extremely high.
If an investor sets the short put strike in the 20–22x P/E range (i.e., around $150–$165), the position would have a relatively strong margin of safety.
With a larger margin of safety, the expiration can be extended somewhat. Therefore, 3–4 months, or even 6 months, can be workable.
3. When Can Selling Options Backfire?
Although selling options during earnings has a relatively high win rate, it is not a universal solution.
There are two situations you should try to avoid.
(1) The stock has already surged continuously before earnings
First, if a stock has already gone on a strong rally before earnings, do not blindly sell short puts.
Why? Because the stock may have already priced in an earnings beat. In that case, even a slightly imperfect earnings report could trigger a sharp selloff.
A classic case: Intel's earnings for 2025Q4
After earnings, it fell for three consecutive trading days, with a cumulative decline of more than 25%.
A drop of that magnitude cannot be offset by any IV Crush.
So when dealing with a stock that has already surged before earnings, a better approach may be to wait until after earnings and after the pullback, and then consider selling short puts.
Are there cases where a stock surges before earnings and still doesn’t fall after earnings?
Of course — for example, SNDK this quarter (2025Q4).
In that kind of case, you can simply wait for a natural pullback before considering a strategy. There is no need to force a pre-earnings trade.
(2) Stocks with a high historical frequency of AM > EM
A second category to avoid is stocks that frequently see actual post-earnings moves (AM) exceed expected moves (EM).
A classic example: Tesla
In Tesla’s most recent 15 earnings releases, the actual move (AM) exceeded the options-implied expected move (EM) 10 times out of 15, which is a very high ratio.
Therefore, even though Tesla is known for high IV and strong IV Crush, it is not suitable for casually deploying short option strategies before earnings without careful thought.
So how can you check a stock’s historical relationship between AM and EM? Of course — use Moomoo’s Options Analysis feature.
For example, for AMD:
Out of the past 15 earnings reports, AM exceeded EM 6 times, which is normal. Among those 6 times, 4 were to the downside.
For Snowflake, the number is 8 times, which is relatively high.
Investors can observe and study these patterns on their own to gradually build intuition for earnings-season option trading.
4. Stop Loss
Finally, it must be emphasized: Although options sellers generally enjoy a higher win rate, once a tail-risk event occurs, the loss can be unlimited.
Therefore, once you realize your direction is wrong, you must stop out strictly.
– If the stock gaps down after earnings and triggers a downtrend, a short put position must be stopped out immediately !
– If the stock gaps up after earnings and triggers an uptrend, a short call position must also be stopped out immediately !
Let’s look at a classic case: Tesla 2024 Q3 earnings
At that time, Tesla had been under pressure due to weaker-than-expected EV sales and slow Robotaxi progress, and the stock had remained sluggish.
But during that earnings call, Elon Musk delivered effective “expectation management”, which gave investors renewed confidence. As a result, the stock not only gapped up after earnings, but also went on to form a powerful uptrend.
In hindsight, if an investor had been bearish and deployed a short call position before earnings, but failed to stop out immediately after earnings, the loss would have been almost impossible to measure.
Once the option goes in the money, a short call effectively becomes a naked short position: every time the stock rises by $1, you lose $1 — with no upper limit.
The lesson here is clear: If your pre-earnings short-side position turns out to be wrong, then the moment the earnings answer is revealed, you must stop out immediately.
Now, we have wrapped up the three-post moomoo Learn earnings-season options strategy series. Hope this series can be helpful for your earnings-season trading!
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.Read more
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