Does Buying Options Before Earnings Make Money? 315 Reports, Tested

Earnings day is when options traders try to hit it big. A company reports its results, the stock jumps or drops 5% or 10% overnight, and an option bought the day before can double.

The catch is that everyone knows the report is coming. So options cost more before it, and their price drops as soon as it's out. That drop is called IV crush.

So does buying options before earnings make money? We tested it on 315 earnings reports from five big US companies, from January 2011 to November 2026.

What the options are pricing in

Before a report, you can see how big a move the options market expects. It's called the expected move, or the implied move.

The easiest way to see it is a straddle. That's a call and a put at the same strike, the one closest to today's price, expiring just after the report. A straddle makes money if the stock moves far enough either way. Its price, as a share of the stock price, is roughly the move the market expects.

Say a $100 stock has a straddle that costs $5. The market expects a move of about 5%. If the stock moves 8%, the straddle is worth $8 and you made $3. If it moves 2%, it's worth $2 and you lost $3.

That's the whole game. You don't win by guessing that the stock will move. Everyone knows it'll move. You win only if it moves more than the price says.

How we tested it

Old option prices cost money to buy. But Cboe, the big US options exchange, publishes a daily volatility index for five large stocks: Apple (VXAPL), Amazon (VXAZN), Alphabet (VXGOG), Goldman Sachs (VXGS), IBM (VXIBM). Each works like the VIX, but for one stock. It shows how much movement the options are pricing over the next 30 days.

The day before a report, that index includes the report. The day after, it doesn't. The difference tells you how big a move the options were pricing for the report itself. We turned that into the price of a straddle that expires the day after the report.

We took the exact time of each report from the company's filing with the SEC, the US market regulator, so we know if it came out before the open or after the close. Then we compared the priced move with the stock's real move, from the last close before the report to the first close after it. That gave 315 reports, about 63 for each company.

These are model prices, not real quotes. Real prices can differ a little, and we come back to that at the end.

Did the stocks move more than the options expected?

Usually not. On average the options priced a move of 4.9% and the stocks moved 4.6%. That sounds close, but the stock moved more than priced on only 39% of reports.

A few huge moves lift the average. The typical report moved only 84% as far as the options priced. On 88 reports the stock moved less than half the priced move. On 29 it moved more than twice as far.

It wasn't the same for every company. Amazon, Alphabet and IBM moved about as far as priced, and their straddles made a little on average. Apple moved less, 4.0% against 4.6%. Goldman Sachs moved far less: 2.3% against 3.4%, and its stock beat the priced move on only 21% of reports.

Buying a straddle the day before

So what if you bought a straddle at the close before every report and sold it at the close after? You'd lose most of the time. 61% of the straddles lost money, and the typical one lost 16%.

But the winners were big. The best one, on Alphabet in October 2013, made 533%. The options priced a 2.2% move and the stock jumped 13.8%.

Say you put $1,000 into a straddle on every report. That's $315,000 over 315 reports, and you'd have ended $4,384 down, close to break-even. The best 31 reports, one in ten, made $56,639. The other 284 lost $61,022.

So you lose small most of the time and win big now and then. And that's before costs. You pay the spread on two options going in, and again going out.

It's got worse since 2023

From 2011 to 2022, the straddle averaged +3.3% a report. From 2023 it averaged −15.0%, and −29.5% in 2025.

The options started pricing bigger moves: 5.4% on average since 2023, against 4.7% before. The stocks didn't move more. They moved 4.4%, against 4.6% before.

Just buying a call

Most people don't buy straddles. They buy a call because they think the results will be good. A call bought the day before and expiring right after the report made money 38% of the time. The typical one expired worthless.

Being right isn't enough. The stock went up after 153 of the 315 reports. On 23% of those, the call still lost money, because the stock didn't rise as far as the call cost.

IV crush: right on the stock, and still losing

Implied volatility, or IV, is how much movement the options are pricing, as a yearly number. It's high before a report, because a big move is coming. Once the report is out, the big unknown is gone, so IV drops.

On average, the 30-day IV of our five stocks was 34.4% the day before a report and 27.2% the day after. That's a drop of about a fifth, overnight.

The crush hurts options that expire later, because they still have time value to lose. Take Amazon on 30 April 2024. The stock closed at $175.00 before its report and $179.00 after, up 2.3%. Good news if you'd bought a call. But its IV fell from 47.9% to 28.5%.

A one-month call at the $175.00 strike cost about $9.57 in our model. After the report it was worth about $7.90, a loss of 17%. If IV hadn't dropped, it would have been worth $11.65.

Across all 315 reports, the stock went up 153 times. The one-month call made money on 129 of them and lost on 24. Without the crush, the average one-month call would have made +17.3% a report. With it, +0.9%.

What about selling options before earnings?

If buyers lose most of the time, sellers win most of the time. Selling the straddle the day before won on 61% of reports.

But the losses are big and sudden. On that Alphabet report in October 2013, a seller lost over 5 times what they collected. And since the average buyer about broke even, so did the average seller, before costs. Selling options also needs a margin account, and a short call can lose more than you put in.

What the research says

In 2018, Chao Gao, Yuhang Xing and Xiaoyan Zhang studied straddles on US stocks. Straddles usually lose money, they found. But straddles bought three days before an earnings report and sold on the day of the report earned 3.34% on average.

Their reading is that investors underestimate how uncertain earnings are. The effect was strongest in smaller, more volatile stocks that cost more to trade. Note when the money was made: in the days before the report, not by holding through it. In our data, IV rose 3.5% on average over the last ten trading days before a report.

What this test can't tell you

• The option prices are a model built from Cboe's volatility indices, not real quotes. These indices include far-out options too, so they can price a slightly bigger move than a real straddle. If real straddles were 10% cheaper, the average straddle made about 10 points more. If they were 10% dearer, about 10 points less.
• We left out trading costs. Options on earnings can have wide spreads, and a straddle pays the spread on two options, twice.
• These are five of the biggest, most traded US companies. Smaller stocks move more on earnings, and their options cost more to trade.
• We held from close to close. Many traders sell at the open after the report, which can come out better or worse.
• We skipped 17 reports that came out while the market was open.

So does buying options before earnings make money?

Not reliably. The options already know a report is coming, and they usually price a bigger move than you get. Straddles bought the day before lost 61% of the time. Calls lost even when the stock went up, 23% of the time for a call expiring that week.

On average a straddle about broke even before costs, because one report in ten paid for the rest. Since 2023, with options pricing bigger moves, it lost 15.0% a report. If you trade earnings, check the expected move first. The question isn't "will it move?" It's "will it move more than this?"