Corporate earnings announcements are one situation where I may expect significant volatility without knowing the direction of the share price.
However, I would not automatically use a straddle or strangle. Implied volatility often rises before earnings, making options expensive. Even if the stock moves substantially, volatility crush and time decay could erode potential profits.
I would compare the market's implied move against historical post-earnings movements and calculate the breakeven points before considering either strategy.
A strangle requires less upfront capital but needs a larger price movement to become profitable at expiry.
Personally, I prefer avoiding trades when the risk-reward relationship is unfavourable. Sometimes, preserving capital and waiting for clearer opportunities is more sensible than forcing a trade simply because volatility is expected.
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