I have a question regarding which of the above setups is ideal for trading earnings events.
I have been back and forward testing both structures in a variety of combinations across dozens of events (so far) and am so far not able to strongly conclude which structure is best for what I’m doing.
Pretty simple strategy and not an uncommon one. Selling elevated front month IV for earnings, buying lower IV back month. Profit off of larger front month collapse. The setup isn’t really theta but more so term structure.
The biggest issue I’ve run into so far with forward testing is that even though the edge is there in selling elevated IV/RV, the bid/ask spread on these setups (especially double calendar) can be so wide it’s hard to get a reasonable fill that doesn’t compromise the edge.
So I’m curious if anyone else trades these and has any insight into which setup is optimal. I’m leaning towards a single ATM calendar since spread is lower and net debit is also lower. Any advice is appreciated z
Thank you!