Part I: Introduction
In this section, we introduce the philosophy behind our main trading strategies. We specifically discuss three important questions that motivate our investigation. Why do we focus on earnings announcements? What options strategies are available to explore different aspects of earnings announcements? What is the impact of liquidity on the performance of option-based trading strategies?
In Chapter 1, we discuss the most important features of quarterly earnings announcements and document large market reactions to them. Such volatile price movements present excellent trading opportunities, but directional bets on earnings announcements can be highly risky. In Chapter 2, we go over some of the basics of options trading and provide ...
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