Earnings: the one event where I close, not open

I have run more than a thousand earnings trades over my career. The rule I landed on is simple. Close before the print. Almost always. The exceptions are specific structures designed to capture the IV crush itself, and even those I run small.

Why earnings break models

Earnings is the rare event where two things happen at once. The stock can gap a large amount in either direction, and implied volatility almost always crashes immediately after the report. The crash is not optional; it is the market re-pricing for the next quarter of relative calm.

Long-vol trades (calendars, debit spreads, long puts, long calls) get hurt by the IV crush even when direction is right. A long call that should have gained $200 on a $5 rally can lose value if IV drops far enough. That is the unique pain of trading earnings as a buyer.

You can guess direction perfectly and still lose money on earnings. The crush is what does it.

What about selling premium into earnings

Selling premium into earnings collects the inflated IV. The trade wins on the crush. The risk is the gap: if the stock moves more than the implied move, the loss can be larger than the credit you collected. Defined-risk versions (iron condors with wide wings, broken-wing butterflies) cap the damage.

I trade earnings premium occasionally, with three rules:

• Defined risk only.
• Position size below 1% of account.
• Wings outside the implied move.

The 21-day rule meets earnings

If a trade you opened lands inside an earnings window, close it before the print. Even if it is a winner, even if it has 10 days left, close it. The standard exit discipline is built around normal IV behaviour, and earnings is not normal.

What to do next

The scanner shows an earnings-in-N-days chip on every idea whose expiration crosses an earnings date. Read that chip carefully. If you do not have a specific earnings plan, skip those ideas and come back the day after the print.