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Here's how you can trade Options during the corporate results s

• Posted by Abhi Pandey January 16, 2022 Filed in Business #results  #Options  #trading  9 views
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  Every quarter we are presented with opportunities to trade due to the announcement of corporate results . These results create movements in the stock prices. As we all know more movement means more opportunities to trade.

  How do Options come into the picture?

  There are two roles - options can play in trading result-led movements. One is to estimate the move that result may create, and the other is of trading that estimate. Let us look at each one of them one by one.

  1. Option as an Estimator:

  As we all know option premiums are influenced more by the sellers of the options. Just like Insurance premiums are dictated by the Insurance Sellers (Insurance companies). Now, consider result season as the time of infection season like monsoons (where there is more risk of disease). If there is more risk, the insurance sellers or in our case option sellers will command more premium.

  Considering that Option sellers are trying to create an estimate of the risk out of the resulting movement, it is safe to say that the same estimate can be used by us to find out how the high-risk takers are expecting the stock to behave post result.

  So, a rather simple technique can now tell us the expected movement post result. The formula for this is very simple. Just add the Call Premium and Put Premium of the strike close to the current market price. The added sum that we get can be added and subtracted from the Strike Price and what we get is the post result expected or estimated range.

  Example: With 2 Days to result in announcement Stock X trades at 100 with

  100 Call @ 3

  100 Put @ 4

  Total Premium of 100 Call + 100 Put = 7

  Post Result Expected Range = 100 – 7 to 100 +7 = 93 to 107

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