How to deal with the contradiction of the options transaction signal before the financial report.
Nvidia reported on Wednesday, so far it will not fall after the earnings report, and the bullish consensus of several options orders is expected to be high. However, some stock options transactions before the earnings report are quite confusing, and the strategy is capricious, such as being bullish yesterday and becoming bearish today.
There are many reasons for this situation, such as different expectations of time, short-term bearish but long-term bullish, a typical example is $Netflix(NFLX)$ this Q3 financial report. The fundamentals of Netflix's financial report are not bad, subscription price increases + writers' strike into the end of negotiations, plus the technical form is close to the 250 average daily line, in all aspects, the probability of bottoming out after the financial report is announced, and options also show institutional bullish, the strategy is mainly to sell put.
This was the situation two weeks before the earnings report, but as the time progressed to the week before the earnings report, the movement suddenly changed to buy put the majority of bearish, which has to remind whether the institution got the pessimistic earnings data.
But both the sell put and the buy put turned out to be right, with shares rapidly falling 6.7 percent in the week leading up to the earnings report, followed by a 16 percent jump in the earnings report that quickly erased those losses. My sell put also changed from falling to rising sadness to joy, and followed a sell ATM put a successful end to this financial report strategy.
Pre-earnings options will include post-earnings share price views and pre-earnings share price views, Q3 earnings season this contradiction is particularly obvious, the pre-earnings drop after the report. If it is simply to see the transaction to do financial reports, it is strongly recommended to give up directly and do not force to start. And if you are familiar with the stock to understand the basic situation of the financial report is confident, it is recommended to proceed normally in accordance with your own trading plan.
Sometimes it is easier to trade after the financial report, and the information landing leads to the reduction of option iv and the price of option, but it is easier to choose the appropriate exercise price. For example, $Alibaba(BABA)$ is a good fit right now. sell put $BABA 20231229 70.0 PUT$
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Excellent article, by reading what you wrote, now I have a better understanding of the present market, which may help my to make wiser decisions.