Earnings Announcements

Options prices often rise considerably ahead of company earnings announcements as the news events have the potential to move stock prices significantly in either direction. The Volatility Backtester enables you to easily evaluate the profitability of your options strategies around earnings events.

Earnings Backtests

You can use the Backtester to evaluate options strategies only around earnings report dates. To do so, select Customize Earnings Announcements within Add Other Conditions in the Additional Customizations section, and choose "This is an earnings trade". This causes the backtest to only include historical dates where your strategy would have been directly impacted by the stock's earnings announcement.

A common earnings strategy evaluated by customers is selling straddles. If the market implied move of the stock, equal to the straddle's price, is greater than the realized stock price move that occurs after the earnings announcement, then the trader will make a profit. Backtesting this strategy on Volatility helps you quickly determine if the market consistently expected larger moves than were realized and if this strategy is historically profitable. On some underliers it has been very profitable, while on others it has not.

Excluding Earnings

Traders will avoid initiating certain options strategies around earnings dates. To backtest these types of strategies, select "Exclude historical earnings dates from the backtesting results".