Straddle Trading

One of the ways of using economic reports, financial news and earning releases is using them in straddle trading. Straddle trading is an options trading strategy that involves simultaneous buying put and call options with the same strike price - the most common way is to use ATM (at-the-money) options.

Straddle trading provides a unique opportunity to profit from options trading no matter where the market goes. However, in order a straddle to be profitable, an underlying stock has to make big move.

As a rule earning release, FED announcements and other scheduled financial and economic reports could be used to expect such big moves and increased volatility. Right after the economic releases you may see sudden increase in volatility and as result, there a possibility that if a stock makes a strong move up the call options will gain in value more than the put options lose in their value. Respectfully, following economic news release, the strong down move may result in the put options gain would out-beating the call options loss.