Options strategies › Covered Calls Before Earnings
Covered Calls Before Earnings
Covered Call Earnings Announcements
Selling a covered call right before earnings captures option pricing at its most inflated. Implied volatility climbs into the event and drops sharply the morning after — the 'IV crush' — which can profit the short call even if the stock moves.
You hold the shares into an earnings date and want to sell premium while it's inflated.
Pillar 1 · Illustrative setup
How this example is built
Sell a short-dated call just before earnings, when its premium is puffed up by high implied volatility, then let that volatility collapse after the report.
Illustrative inputs only — not live prices.
Open the on-device calculator →
The on-device spread calculator covers vertical spreads; the figures above are the covered-call formulas worked for this illustrative setup.
Pillar 2 · When & why
Why this fits Earnings Announcements
The appeal is the IV crush: a large part of the call's value can evaporate overnight once the uncertainty is resolved. The danger is a big beat or miss — a sharp gap up caps your shares at the strike, and a gap down is only lightly cushioned by the premium.
Earnings are binary. A gap through your strike caps the upside; a gap down leaves you long the stock with only the premium as a buffer. The IV crush helps the option, not the shares.
Pillar 3 · Risk / reward