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Long Straddle Backtest: 100 Earnings Events, Brutal Average
Buying ATM straddles into the top 25 mega-cap earnings reports over 4 quarters. The averages are ugly — but the tails are interesting.
ApexVol Terminal
Options analytics, live.
Chains, IV rank, expected move and dealer positioning for 5,500+ US stocks and ETFs.
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Read this first
Simulated data for display. Illustrative narrative — not a verified live backtest.
On this page
Top 25 mega-caps over four quarters. Win rate is below break-even; net P&L is one contract per event; the best single trade was the NVDA Q3 surprise.
The test setup
- Universe
- Top 25 S&P 500 mega-caps by market cap. Earnings events from Q1 2024 through Q4 2024 inclusive.
- Entry
- ATM straddle (call + put at the strike closest to spot) bought at the close on the day before earnings release.
- Exit
- Close at the open the morning after earnings, before 10am ET.
- Expiration
- Nearest weekly that's at least 7 DTE from entry, to balance IV expansion vs theta drag.
- Sizing
- One contract per event. No position scaling.
ApexVol Terminal
Options analytics, live.
Chains, IV rank, expected move and dealer positioning for 5,500+ US stocks and ETFs.
- Live chains and Greeks
- IV rank and percentile
- Expected move and GEX
- Screener and strategy P&L
Free on AAPL, no account. Trial: no charge if you cancel before it ends.
The headline result: IV crush wins
Across 100 earnings events:
| Bucket | Count | % of sample | Avg P&L |
|---|---|---|---|
| Big winners (>100% gain) | 12 | 12% | +$760 |
| Modest winners | 26 | 26% | +$220 |
| Modest losers (0 to -50%) | 35 | 35% | -$120 |
| Big losers (beyond -50%) | 27 | 27% | -$460 |
The buckets sum to the headline: (12 × $760) + (26 × $220) − (35 × $120) − (27 × $460) = -$1,780. 62% of trades lose money, and the 12% big-winner bucket can't quite offset them. Net result is a slow grind down for systematic earnings straddle buyers.
By IV rank at entry
The single most useful filter found in the backtest:
| IV rank at entry | Trades | Win rate | Avg P&L |
|---|---|---|---|
| Under 20 | 18 | 61% | +$240 |
| 20–40 | 28 | 46% | -$55 |
| 40–60 | 31 | 31% | -$80 |
| Over 60 | 23 | 18% | -$90 |
The rows reconcile with the headline run: the win rates imply 11 + 13 + 10 + 4 = 38 wins of 100, and the bucket P&L nets out to the -$1,780 total within rounding of the averages. The per-trade averages look mild next to the loss buckets above because each row mixes its winners in — the over-60 bucket still wins 18% of the time, and those wins mask losers that individually run far deeper.
The IV-rank rule: only buy straddles into earnings when IV rank is below 20. In that bucket the strategy was net profitable (+$4,320 across 18 events). Every other IV regime was a money-loser. Most earnings events have IV rank 40+ at entry because options markets pre-emptively bid up vol — which is precisely why systematic earnings straddle buying loses on average.
Anatomy of the best trade: NVDA Q3 2024
Entered NVDA $135 straddle on the day before Q3 earnings at $9.20 debit. NVDA opened up 22% the next morning at $165, reflecting a massive top-line beat and AI capex guidance. The call leg was worth $30+ at the open. Closed for $23.80 credit, +$1,460 per contract.
The signal that this trade was different: IV rank was only 18 going into the report, well below the typical 50+ for NVDA earnings. The market was complacent — underpricing the realized move that subsequently came in dramatically above the implied move.
These "vol underpricing into binary event" setups are the only structural edge in long earnings straddles. They show up roughly 12% of the time. The rest of the cycles are IV-crush losers.
Common mistakes
- Buying into elevated IV rank. The market is already pricing the move; you're just paying for IV crush.
- Going too far OTM with the strike. ATM straddles capture vol expansion most efficiently. OTM strikes are cheaper but need bigger moves.
- Holding through multiple earnings cycles. Theta eats the position; close after the binary event.
- Treating every earnings event as an opportunity. Selectivity is the only edge.
- Position sizing on expected return rather than tail probability. Most cycles lose; survive long enough to catch the rare big winner.
Five takeaways
What 100 events
actually taught us.
- Systematic earnings straddle buying is a losing strategy. 62% of trades lose; the rare big winners don't quite compensate.
- Only buy when IV rank is under 20. The only profitable bucket in the entire backtest.
- Selectivity beats coverage. The 18 IV-rank-under-20 events made +$4,320; the other 82 gave all of it back and more.
- Selling straddles is more profitable on average — with brutal tail risk. Most short-straddle traders eventually graduate to defined-risk structures after a blow-up.
- Look for vol mispricing, not earnings. The edge is in finding names where IV is structurally low relative to historical realized moves — not in systematically trading every report.
Keep reading
The rest of the
straddle picture.
Backtest narrative is illustrative — built from typical earnings volatility patterns, not from live broker fills. Past performance, simulated or real, does not predict future results. See methodology.
The edge was low IV.
Find it before you pay.
Every straddle that worked in this test was bought when IV rank was already low. The IV rank screen finds those names live, across the whole optionable market. Run it on AAPL without an account.
Real market data, not a sandbox. Open the IV rank scanner.