I want to walk you through exactly how I approach earnings trades — because it’s not about guessing direction or hoping for a home run. It’s about using historical data to identify when the market’s expected move exceeds what actually tends to happen.
That mismatch creates opportunity, and when I find it, I can structure trades with defined risk and serious upside potential. This applies whether I’m seeing mixed signals on option flow or looking for a setup that’s clearer and easier to read.
Let me show you how this works with a few recent examples I analyzed.
When Expected Moves Are Too High: The Calendar Spread Opportunity
One of the most reliable earnings setups comes from situations where implied volatility is elevated heading into the announcement and likely to get crushed afterward. When I see a mix of bullish and bearish sweeps — essentially a toss-up — that’s often a sign the stock might chop around instead of making a sharp directional move.
In that kind of environment, I’m looking for something cleaner, and a calendar spread can be the perfect fit.
I was looking at DoorDash (DASH) heading into its Feb. 20 earnings, and something immediately caught my attention. The broker expected about a 12% move, but the historical data showed the stock actually moves closer to 9-10% on average.
That’s a textbook calendar setup.
I sold the $160 call expiring Feb. 20 and bought the $160 call expiring Feb. 27 for a $1.40 debit. My break-even prices came in at $133 on the downside and $195 on the upside — well outside the expected range.
The beauty of this structure is that if the stock stays within that expected move and we get a bit of a chop fest after earnings, I’m targeting a 50-100% gain. I’m not betting on fireworks — I’m betting on the market overestimating volatility and letting that IV crush work in my favor.
When History Says Go Directional
Not every earnings setup calls for a neutral strategy. Sometimes the data tells you to take a stance, even if the stance is simply being directional rather than predicting bullish or bearish movement.
When I analyzed the last 13 earnings reports for Carvana (CVNA), something stood out — 10 times the stock hit the expected move, and only three times it didn’t. That consistency is exactly when taking a directional approach makes sense.
I also noticed strong bearish flow, so I built a directional put debit spread: a $337.50/$335 put spread for $1.20, risking $120 to make $130 — a 108% potential return.
I also spotted bearish setups in Walmart (WMT), where I entered a $130/$128 put spread for $0.91 and looked to define risk on the upside with a bear call spread.
Directional trades like these shine when historical data shows the stock tends to make a meaningful move after earnings and when current flow lines up with that history.
Pro tip: Don’t overstay your welcome. I never hold options tied to earnings for more than about two weeks. If the expected move hasn’t played out by then, it usually means the earnings impact has faded and the trade’s edge is gone.
This is how I approach every single earnings announcement — not with guesses, but with data, structure and a clear plan for multiple outcomes.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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