Mar 19 • General discussion
Learn to Trade the IV Crush the Right Way (ACN Earnings, 3 Ideas)
There is one of the most consistently profitable edges in options trading: earnings volatility.
It is backed by years of academic research, it repeats every single quarter across hundreds of names, and still most traders approach it the wrong way. Done correctly, earnings trades can become the backbone of a highly repeatable income stream. You're not gambling on direction; use a structured approach that puts probability in your favor.
Today I'll show you exactly how I apply that framework to a live setup. ACN reports earnings after the bell, and below are three specific trade ideas built around the same edge.
Most traders look at a large implied move, assume the market is overpricing the event, and sell a strangle. It works. Until it doesn't. And one loss will erase months of careful premium collection.
That is because your real edge is not in blindly selling premium, but in understanding that earnings distort the term structure in a very specific and very tradable way.
The expiration that contains the announcement gets loaded with huge event premium, and the next expiration out contains far less of it. After the print, the front-week premium collapses immediately, and the deferred week crushes much less.
That spread between expirations is one of the most consistent opportunities in options, validated by thousands of backtests and academic research.
For Accenture (ACN), the 3/20 expiration is carrying the event risk, the 3/27 expiration is not. That gives us a clean surface distortion to target. And here are three ways to trade it, depending on how strong your directional view is.
Trade 1: Bullish Diagonal
Structure: Sell 1 x 210 Call, expiring 3/20, Buy 1 x 205 Call, expiring 3/27.
This is the cleanest and most repeatable setup of the three, because you are selling the most inflated part of the surface, and buying a slightly lower-strike call in the next expiration, where IV should hold up much better after the print. The long 205 call sits below the short 210 call, which gives the structure a bullish shape.
It works best if ACN beats and moves into roughly the 205-215 zone. In that case, the short 3/20 call loses its event premium quickly, while the long 3/27 call still retains intrinsic value and time value. This is the trade I would choose when I want upside exposure, but I do not want to overpay for front-week earnings IV by simply buying a call.
Trade 2: Double Diagonal
Structure: Sell 1 x 210 Call, expiring 3/20, Buy 1 x 205 Call, expiring 3/27, Sell 1 x 175 Put, expiring 3/20, Buy 1 x 180 Put, expiring 3/27.
This is the cleaner, more balanced version of the same idea for traders who want a near-neutral, pure IV-crush expression. You are selling front-week earnings premium on both sides while owning deferred optionality in both directions. The delta is close to flat, so this is not a directional bet.
The key point is that this is not a naked short strangle, so if ACN moves hard in either direction, the back-week longs provide real offset, and because they live in the 3/27 expiration, they do not collapse nearly as hard as the 3/20 shorts after earnings. That is what gives the trade its edge.
Trade 3: Long-Ratio Diagonal
Structure: Sell 1 x 200 Call, expiring 3/20, Buy 2 x 215 Calls, expiring 3/27.
This is the most advanced structure, and it is built on a different logic from the first two. You are selling the richest near-ATM event premium in the chain (the 200 strike, which sits close to the expected-move center) and using that premium to finance two out-of-the-money back-week calls.
If ACN explodes higher on earnings and continues higher into next week, the two long 215 calls become the dominant position and the payoff becomes strongly convex. If ACN drops, the structure keeps a small credit. The danger zone is the band where the short 200 call becomes meaningfully in the money, but the long 215 calls have not yet fully taken over.
Note: These trades require active management at the market open on Friday, March 21. The setups were designed after the close, so the prices shown are based on closing marks and bid/ask spreads may differ.
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Learn to Trade the IV Crush the Right Way (ACN Earnings, 3 Ideas)
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