I’m about to clue you in to the most reliable trading pattern on the planet.
Surprisingly (or perhaps not so surprisingly) most people haven’t heard of it.
You’ve heard the saying, “What goes up, must come down”. There’s even a song by Tyrone Davis proclaiming it. It’s true for many things in life. It’s usually true for stocks. Nowhere is this more true than with a little known characteristic of a stock options value.
I’m talking about Implied Volatility (IV). This is the market’s forecast of how much (not what direction) an option is likely to move.
Although IV crush into earnings is a virtual guarantee, the degree of crush is difficult to anticipate. What isn’t difficult to anticipate is that IV will tank after the announcement. This happens each time, every time.