We often trade the high volatility into earnings plays; however, we also trade them by selling puts or calls as the intra-day pattern sets up within the first 60-minutes following a bullish or bearish gap.
This is why we always track earnings dates of leading, high volume optionable equities.
Below is the weekly chart of CREE:
Last month it broke out of consolidation from Major Support around $23.50 with a Bullish Wide Range Bar (+WRB).
Below is the daily chart of CREE reflecting the closing price before earnings were released on 8/16/16:
After the bell earnings were released and the stock tanked to the low $25s where minor support is at the prior gap area, and stabilized in the mid-$25s.
Because of the gap to support and bullish support area on the daily and weekly charts, this will be an excellent candidate to consider puts today.
Provided a bullish intra-day pattern sets up at the open.
Although the pre-earnings high implied volatility will substantially contract, the large gap will nevertheless keep them elevated for a short-term trade.
I will update this Option Newsletter later and describe my trades, if any.
Happy trading! If you have any questions or comments, please e-mail Dan Gibby at Dan@gregcapra.com