Avoid Trading Around Earnings Announcements

Earnings announcements bring a lot of volatility and unexpected price movement. Earnings season is busy, and it’s tough to keep the dates organized for a portfolio of securities.

You may want to avoid or target new trades before the event. Before automation, you had to track earnings dates and react manually. Now you can offload the process onto the bots.

The bots are smart enough to know when a company announces earnings. So, you can precede any decision action with this recipe to tailor your strategy to the event. Simply add the decision recipe to check the earnings date and use it as a filter to enter or exit a trade.

For example, you can avoid the announcement altogether and only open a position far enough in the future that you don’t hold the position around the event. If an earnings announcement is 40 days away, and you set the options expiration date for 30 days, you don’t have to worry about the volatility leading up to the earnings date.

You can also use the recipe to close a position before the announcement automatically. Simply add a close position action if an earnings announcement is approaching.

For example, if earnings is less than five days away, you can tell the bot to close the position.

Calendar filters demonstrate the power of bots and automation. Trading is hard enough. Backtesting ideas. Scanning for opportunities. Executing trades. It is a time-consuming process. Now you can automate tasks to reduce your workload and keep you focused on higher-level projects.

Transcript

The text is the output of AI-based and/or outsourced transcribing from the audio and/or video recording. Although the transcription is largely accurate, in some cases, it is incomplete or inaccurate due to inaudible passages or transcription errors and should not be treated as an authoritative record. This transcript is provided for educational purposes only. Nothing that you read here constitutes investment advice or should be construed as a recommendation to make any specific investment decision. Any views expressed are solely those of the speaker and should not be relied upon to make decisions.

In this video I want to show you how to avoid trading around earnings announcements using a very simple decision recipe inside of your automations at Option Alpha.

This is a demo scanner automation that we previously built out which just has a very simple decision that you’re going to go through before you enter an iron condor position.

Again, this is just an example and just shows you how to add this particular decision recipe to check earnings dates and use that as a reference to filter out trades or to get into trades based on how close the particular symbol is to its earnings announcement.

In this case, we have a very simple decision to start which can be used as just a placeholder for any of the decisions that you ultimately want your bot to go through before it gets to the point of making a trade. Here we are just checking to see if AAPL’s IV rank is above 50 and if it is, we want it to open an iron condor position in AAPL. Simple enough.

But let’s say that we want it to check and see if AAPL had earnings coming up and we want it to avoid trading through an earnings event.

Well, in this case we can open up first the iron condor position that we’re looking at and we’re targeting around the 30 day expiration timeline for our iron condor position. So, we probably want to avoid trading through earnings if earnings are coming up in the next 30 days.

So, here’s how you add that filter to your automation. You simply click on the gear icon right ahead of or in any of the areas that you want to add the recipe to and you can precede this with a decision. We’re going to precede this with a decision that goes through and checks to see when a symbol reports earnings. This is this recipe here, "Symbol reports earnings in more than, less than, or exactly a certain number of days."

And again, just use this natural language here to complete the recipe. We’ll click on it and we’ll start filling out the fields.

You can use the actual typed in symbol like AAPL in this case to make it easy, or as we’ve shown you in other videos, you can create custom inputs to make this whole thing more flexible. For now, we’ll just use AAPL for our example.

Then we’ll go over to our modifier. Now we’ll select which one of these we want to use. APPL reports earnings in more than, less than, or exactly a certain number of days. Here we’ll keep it at more than.

We want to make sure that APPL reports earnings more than the number of days that we possibly get into a position. If we open an iron condor position that expires in 30 days, we want to make sure that AAPL’s earnings are more than 30 days out. That way we don’t have to trade through or around the actual earnings event.

So, we select more than and then we choose the number. In this case we can give ourselves a little bit of a buffer too and say we want to make sure that AAPL reports earnings in more than 32 days. Once we’re good to go we simply hit save and add this to our automation editor.

Now we’ve quickly and very easily added a very simple filter that prevents us from trading around earnings announcements. Now it’s going to check and see if AAPL’s IV rank is above 50 and if it is and the answer to that question is yes, it will continue down the "Yes" path.

Then before it gets to the point of actually making a trade, it’s going to check and make sure that AAPL reports earnings in more than 32 days.

Again, this is just a couple days beyond the number of days that we’ve targeted for our expiration. And only if the answer to that question is yes, then do we allow the bot to send an order to try to open an iron condor position.

So again, using this recipe here to check for when a particular underlying security is reporting earnings is a really flexible way to make sure that you’re trading exactly the environment and the timeframe that you want right inside of your bots at Option Alpha.