Preface
With the market's direction becoming tenuous, we can explore option trading opportunities in Alphabet Inc (NASDAQ:GOOGL) that do not rely on stock direction.Over both the most recent bull market and the last bear market from 2007-2008, for stocks with certain tendencies, there has been a shrewd approach to trading pre-earnings volatility with options.

The goal is to find trades that expose risk in short-bursts of time, with out-sized historical gains relative to historical losses.



The Trade Before Earnings in Alphabet Inc
Let's examine the results of getting long a weekly at the money straddle 4-calendar days days before earnings, and then sell out of that position one-day before the actual release earnings.

Here is the setup:



We are testing opening the position 4 calendar days pre-earnings event and then closing the straddle 1 day before earnings. This is not making any earnings bet. This is not making any stock direction bet.

Once we apply that simple rule to our back-test, we run it on an at-the-money straddle:

Returns
If we did this long at-the-money (also called '50-delta') straddle (using the options closest to one-week in expiration) in Alphabet Inc (NASDAQ:GOOGL) over the last three-years but only held it before earnings we get these results:

GOOGL
Long At-the-Money Straddle

% Wins: 75.00%
Wins: 9 Losses: 3
% Return:  24.2% 

Tap Here to See the Back-test

The mechanics of the TradeMachine™ are that it uses end of day prices for every back-test entry and exit (every trigger).



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The results show a 24.2% return, testing this over the last 12 earnings dates in Alphabet Inc. That's a total of just 36 days (3 days for each earnings date, over 12 earnings dates). That's an annualized rate of 245.4%.

We can also see that this strategy hasn't been a winner all the time, rather it has won 9 times and lost 3 times, for a 75% win-rate and again, that 24.2% return in less than two-full months of trading.

Here is a 1-minute and 25-second video that shows you exactly how to do this for any stock and what every professional option trader would rather that you don't see.

Learn more here: Try the Back-tester Yourself

Setting Expectations
While this strategy has an overall return of 24.2%, the trade details keep us in bounds with expectations:
      The average percent return per trade was 3.13%.

Tested Across Bull and Bear Markets
While many times we can identify strategies that work during a bull or a bear market, this strategy, when we tested it empirically, worked during both. Here are the specifics:

Using the Nasdaq 100 and the Dow 30 as our study group, here are the average total returns by stock for the bull market from 2012-2018 (January) and 2007-2009, which includes the bear market, and the wild 2009 -- where the S&P 500 bottomed in March and then ripped higher -- in other words, a highly volatile time in the market.

As a quick reminder, here is the 2007-2009 period for the S&P 500:



Time Period Return by Stock
2012-2018 (January) +40%
2007-2009 +21%

Since we are looking at total returns, it turns out those time periods show nearly identical results (2012-2018 was six-years and 2007-2009 was three-years). Yet more impressive, the strategy showed a 57% win rate by stock during the wildly volatile 2007-2009 market.

These results are empirical, which is to say, they are objective. We are not inserting opinion.

WHAT HAPPENED
This is it -- this is how people profit from the option market -- finding trading opportunities that avoid earnings risk and work equally well during a bull or bear market.