@Ranger, many thanks as well. However if this is known behavior, couldn't one short prior to every earnings announcement,
Since we are talking about earnings, I will discuss front month options. That way time value won't come into the picture. My earnings trade only last overnight (some time less, if i neutralize delta during o/n) to two weeks.
While it is true that during earnings Vol. is elevated compared to normal range, it does not mean that volatility is rich so one can short at will and mint money. These earnings volatility needs to be compared with previous earnings announcement to see if the vol. is rich or cheap. Also one needs to pay attention to earnings estimate dispersion.
When one is short options volatility crush is given and it helps for traders who are short, but big price (delta) movement can overcome this vol. crush.
Take example of recent GOOG earnings, when vega was run over by delta changes.
Prior to earnings GOOG vol. while rich was under-priced when compared to other earnings days.
Option market was expecting 3.5% movement, while historically it moved about 5.6% (median). This is about less than 25%le of other report days.
It is better to have long option strategies when the vol. is under-pricing (while richer compared to normal daily ranges) and short option strategies when vol is over estimating the price movements.
airahcaz wrote: Secondly, the stock has recovered today, unbeknownst to me as to the reasons why, and it seems VOL has also increased?
I don't see any recovery in AAPL vol. today