In earnings season, volatility is the trade.
Now that we understand Delta, Gamma, Theta, and Vega, it is time to apply them.
One of the most popular short-term options strategies revolves around earnings events.
In crypto, earnings seasons do not exist, but major events such as protocol upgrades, token launches, and regulatory announcements act similarly.
These events create predictable patterns in implied volatility and option behavior.
How Earnings Events Impact Options
Leading into an earnings event:
- Implied volatility rises
- Option premiums expand
- Vega becomes a dominant factor
After the event:
- Implied volatility collapses
- Option premiums drop sharply
- Time decay accelerates
The move itself matters less than the change in volatility.
Common Trading Approaches
1. Long Volatility Before the Event
- Buy straddles or strangles
- Bet that the move will be larger than implied
- Needs a significant breakout to overcome premium cost
2. Short Volatility After the Event
- Sell options or spreads
- Capture premium after volatility collapses
- Needs the market to settle down post-event
3. Pre-event Vega Capture
- Buy options early before volatility rises
- Sell before the event itself
- Profit from rising implied volatility without holding through the news
Greeks to Watch
- Vega: High leading into the event, collapses after
- Gamma: High near expiry, making Delta shifts rapid if price moves
- Theta: Accelerates post-event as time decay increases
Successful event trading means managing Vega before the announcement and Gamma after the move.
Why It Matters in Crypto
- Major upgrades such as Ethereum forks, Bitcoin halvings, and Layer 2 launches behave like earnings events
- Options around these dates show sharp increases and collapses in implied volatility
- Trading around volatility shifts is often more consistent than guessing the actual news outcome
On Derive
- Monitor implied volatility for upcoming events
- Use subaccounts to isolate event-driven trades
- Build straddles, strangles, or spreads depending on the strategy
- Track Vega and Gamma live to adjust exposure dynamically
Your Action Today
- Choose a major upcoming crypto event or announcement
- Look at implied volatility in the Derive options chain
- Think about how you would position for rising volatility before, or decaying volatility after
Tomorrow, we will dig deeper into how to structure straddles and strangles specifically for event trading.
Coming tomorrow:
Day 22 – Event Straddles and Strangles: Maximizing Volatility Plays
Hasta manana
Cpt
CptRandlelwa
