/biz/ - Business & Finance

>>55905144
>Because of this, it's possible to buy a put or call ahead of earnings, have the price move in your favor, and still lose money.
Volatility effects the extrinsic value of options. High volatility is good for the value of contracts. This is why you want to be early when purchasing option contracts - so you can capture the volatility of an anticipated event that drives the contracts value up. In the event of earnings the volatility typically falls after the announcement is made as the market prices in the details, IV reverts back to its mean which crushes the contracts extrinsic value thus you can be in the money but still flat or negative in value
>>55905167
It's literally not like sports gambling at all. Is there risk involved? Yes. However there are so many technical indicators and information available to an educated trader that it can hardly be called 'gambling' and sports is a bad analogy because of how options expirations work. There is so much more room to work with than simply labeling it a gamble