Thread by @SubhadipNandy16

Results trading is one of the biggest plays on options markets worldwide. The theory goes like this :
Before results, IVs shoot up as both bulls and bears buy options expecting a major move in their chosen direction.

Now, it has been a proven theory that IVs "generally" overstate the actual move that happens post results. This has given rise to the famous results trades for options sellers where the sell straddles or strangles in order to capture the volatility crush post results.

Their trades are based on a higher POP per trade but less absolute profits per trade. Some results obviously are totally against any market expectations and the stock makes a huge move. This gives a major delta loss as well as sometimes when IV goes up, also a vega loss whammy.

There the question of trade management or firefighting comes into the picture. Unless strict position sizing is maintained, a major adverse move can wipe out a large part of the capital of a seller. One also needs more capital to firefight

Options buyers before results are not any better off. They run the chance of making more number of losses ( though defined) in a large number of trades and hope for those 1-2 major moves which covers the losses of the other losing trades.

What I am doing after a lot of testing the last results reason is something in between
1. When wrong --> small losses or very small profits
2. When right ---> small profits or large profits
Out of 4 possible outcomes, I win if any one of the 3 happens, so POP is 75%

I will also manage my positions when slightly trapped or when I want to extend profits, but
1.Will never require more capital
2. Will always be risk defined

The trick is to play a large number of results for this edge to show , any individual trade does not matter.

Remember, nobody can predict with certainty before results that how a stock will behave post results. We have all seen stock crashing after posting good results

I am using data & greeks analysis to :
1. Pick direction
2. Pick the strategy and strikes for a spread
3. Ensuring that loss is very small when wrong

And then hoping for the best :)

Will do 10 trades this season . Trades so far :
1. INFY : bullish direction wrong , out with small profits
2. HDFCBANK : bullish direction wrong, out with small profits
3. HCLTECH : ongoing, playing bearish

I will not play every result. I will put on trades only when my analysis suggests that I have a higher probability of winning or my losses will be very low when wrong. So, if tracking these trades track all and not just a specific trade
I hope this explains these results trades

and btw, I expect to be correct on maximum 40% of the trades directionally and will be wrong 60% of the time