BAC Iron Condor pre-earnings announcement Monday morningThe options market expecting a move of 5.3% in either direction. This move was breached in 2 out of the last 12 earnings .
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The post-earnings move was outside of the implied range 2 times. In those cases, long straddles were profitable. The rest of the earnings moves likely yielded profitable Iron Condors.
Scanning for the best options trade of all calendars, straddles/strangles, iron flys and condors, the highest ranked trade is a IronCondor with strikes at 26, 30, 33, and 37, expiring on 2022-11-04, for a credit of $1.35.
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We can see the theoretical values in more detail. The distribution edge D%, found by the expected value of the payoff picture on the stock's historical distribution, has an edge of 2.0%. The forecast edge, which is derived from historical volatility , has an edge of 13.3%. Lastly, the smoothed edge, which is calculated by drawing a best fit curve through the monthly implied volatilities, has an edge of 0.0%. The edge is relative to the mid-market price of the trade. Greater positive edges are a theoretical benefit to the trader. We can also look at the payoff graph. The probability of profit sums the probability of the nodes for the part of the payoff picture above the zero profit line over three standard deviations. For this trade the probability of profit is 62.31%. The reward to risk divides the max gain by the max loss. Here the 1 to 2.0 is the ratio of the max gain of $133 to the max loss of $-267. There are two break evens for this IronCondor at 28.67 and 34.33. The total greeks and ThinkOrSwim code complete the information on the trade analysis popout.
