10 Minute Read

Tales of a Technician: Trading Bull Calls Around Earnings

February 22, 2021

By | 1 Comment

Mariana asked a great question regarding trading bull call spreads around earnings. Read her query below, then see my response.

“In regards to DKS’s earnings coming up on 3/9, if I were to enter a bull call, what is good guidance on expiration, Weeklys 12 MAR or regular 19 MAR and exit prior to earnings or something else?”


DKS made the options report because of the clean bull retracement pattern. And since the next earnings report wasn’t scheduled for 15 days, we had just enough time to consider a swing trade. As a reminder, if earnings is scheduled within ten days, then it disqualifies a stock for the report.

Still, 15 days doesn’t leave a ton of time, so for those unwilling to ride into earnings, this predetermines the max length of the trade at about two weeks.

First, let’s address strategy selection. Then I’ll zero in on the bull call expiration question.

In a situation like this, I wouldn’t typically consider cash flow plays like naked puts, bull puts, or covered calls. First, the short time horizon doesn’t really allow time decay to work its magic. Second, all three of these strategies are negative vega. And with implied volatility likely to rise ahead of earnings, I’m essentially swimming upstream here.

Directional plays, then, are the only way to go – if I’m going to go at all. Buying stock is the simplest route, but I think long calls work as well. The shorter trade duration (again, dictated by the looming earnings report), means you won’t have to worry much about time decay. And the likely bump in implied vol will work to your advantage. That said, I’d still buy out at least a month, if not two, to minimize the time decay while in the position,

Bull call spreads could also work, but this is where things get tricky. I’m still a fan of exiting prior to earnings, so the question is which expiration month you should use. I’m always partial to the monthly cycle because of the superior liquidity. This is especially true with DKS. There’s hardly any open interest in the 12 March series. So, of the two choices offered by Mariana above, I much prefer 19 March.

$DKS option chain

Since the max trade length is two weeks, I see little reason to go far out in time such as to June or September. But, I think a case could be made for buying April bull calls if you wanted something more conservative than the 19 March. I would simplify the decision as follows:

19 March Bull Call: More Aggressive – make money faster, lose money faster

16 April Bull Call: More Conservative – make money slower, lose money slower

Pick Your Poison

Thanks for the question. I trust my response provided some clarity.

Read more Tales of a Technician [FREE Content]

Tackle Trading: Financial Freedom is a Journey. Sign up now for a 15-day free trial.

Financial freedom is a journey

Sign up now and gain unfettered access to all of the quality content and powerful Scouting Reports that our Pro Members enjoy for 15-days absolutely free with no strings attached and let us show you what your trading has been missing.

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.

One Reply to “Tales of a Technician: Trading Bull Calls Around Earnings”

  1. MichaelProkop says:

    Yes, yes. Makes sense. Thank you for taking time to elaborate!

Comments are closed.

Chart Modal

Tackle Trading

Annual Holiday Sales are here!

Unfortunately, this offer is now closed. If you still want to take advantage of it, reach out to us at [email protected]