The idea: realised move vs implied move

Before earnings, options are priced for a move. One simple way to approximate that move is by adding the at-the-money call and put premiums — the so-called straddle.

From the option chain, the 190 strike is closest to spot. Adding the call and put mid-prices implies a move of roughly ±12 points into expiry.

That translates into an implied range of approximately 178 to 201.

That range is not a forecast. It is simply the market’s consensus risk estimate.

The key question for traders is therefore not “will volatility fall?” — it often does. The real question is: will the actual move be smaller than what was priced?

Earnings views are not one-size-fits-all

Before focusing on the iron condor, it is important to acknowledge that earnings is not a neutral-only event.

Different views lead to different structures:

• A bullish view might look to keep upside exposure while still taking advantage of elevated short-term premium. Structures such as diagonal call spreads allow traders to sell expensive near-term volatility while maintaining longer-dated upside optionality.
• A bearish view might use defined-risk downside structures such as broken wing butterflies or put spreads, particularly when skew and volatility levels make protection relatively expensive.
• A range-bound or neutral view may focus on structures that benefit if the move is smaller than implied, where volatility compression becomes part of the thesis.

This article uses the iron condor as a case study because it cleanly expresses the idea of realised move versus implied move. It is not the only way to approach earnings — it is one way to illustrate how options can shape risk around a catalyst.

Why the iron condor fits a neutral volatility thesis

An iron condor is a defined-risk structure built from two credit spreads:

• One above the market.
• One below the market.

It collects a credit upfront. That credit is the maximum possible profit. The long wings cap the worst-case loss.

In this case study, the structure is:

• Sell 200 call / buy 205 call.
• Sell 175 put / buy 170 put.
• Expiry: 27 February 2026.
• Credit: about 1.62.

Because each side is five points wide, the maximum theoretical loss is the spread width minus the credit received: 5.00 − 1.62 = 3.38.

• Max profit: 1.62 (if NVDA expires between 175 and 200).
• Max loss: 3.38 (if price finishes beyond 170 or 205 at expiry).
• Breakevens: approximately 173.38 and 201.62.

In percentage terms, the potential return on risk is roughly 1.62 / 3.38 ≈ 48% if held to expiry and fully realised. That is the mathematical profile: limited reward, limited loss, asymmetric but defined.

The logic is straightforward: if NVDA moves less than the implied ±12 range and implied volatility compresses after earnings, option premiums shrink and the position can benefit.

Strike selection: math meets liquidity

The short call at 200 sits close to the upper implied boundary derived from the straddle. But strike selection is not only about neat symmetry.

Open interest at the round 200 call strike is significantly higher than at nearby strikes. That matters. Liquidity can determine whether adjustments and exits are efficient or frustrating. The same applies on the downside around 175.

Good strike selection balances implied probabilities with tradability.

What the volatility flush actually does

After earnings, implied volatility often drops sharply. If price remains inside the condor’s range, both time decay and lower volatility work in the trader’s favour.

If price gaps hard beyond a short strike, volatility collapse alone does not save the trade. Direction dominates.

That is the core tension of earnings trading.

An alternative entry: waiting for the first move

Another approach is not to enter before earnings at all.

Some traders prefer to wait for the opening after the release, observe the initial directional move, and then consider selling a structure such as an iron condor within the first minutes of trading. The logic is straightforward: the directional gap has already occurred, implied volatility is beginning to compress, and strikes can be positioned around the new price level rather than guessing beforehand.

However, this is not a simple execution exercise. The first 10 to 15 minutes after earnings often come with wide bid–ask spreads and unstable pricing. Getting filled at fair levels can be challenging, and slippage can materially change the risk–reward profile. In practice, this type of entry is more of an opportunistic attempt than a routine setup.

It can work, but it requires patience, realistic expectations on fills, and a willingness to pass if pricing does not cooperate.

Trade management: defining outcomes before they define you

Because profit is capped, many traders predefine how much of the credit they are willing to harvest, often around 50% to 75%, rather than holding for the final few cents while risk accelerates.

If NVDA opens near one of the short strikes, the position becomes increasingly directional. Some reduce exposure early. If it gaps deep toward a long wing, the defined maximum loss becomes the reference point, and discipline matters more than creativity.

If nothing is done

If held to expiry without adjustment:

• Between 175 and 200, the full credit is retained.
• Beyond a short strike, losses grow toward the wing.
• Beyond 170 or 205 at expiry, the maximum loss is realised.

Doing nothing is a choice. In defined-risk structures, the outcome is mathematically bounded. The path, however, can be uncomfortable.

Practising the idea: paper trading the volatility crush

If you want to understand how this feels without putting capital at risk, paper trading is a practical way to learn.

One simple exercise is this: before earnings, take a screenshot of the option chain for the relevant expiry. After the earnings release, take another screenshot of the same chain on Friday. You can then compare premiums directly, or even provide both screenshots to an AI tool and let it calculate what your hypothetical iron condor would have been worth.

This approach removes emotion from the equation. You see how implied volatility actually reprices, how spreads behave, and whether the realised move would have kept the structure inside its range.

It is not perfect. Execution quality, slippage and timing still matter in live trading. But as a learning tool, it makes the mechanics of the volatility flush tangible and measurable.

Final thought

Earnings are not just directional events. They are volatility events.

The iron condor does not predict where NVDA will trade. It expresses a view that the move may be smaller than implied, and it does so with clearly defined risk.

For active and explorative traders, that is the real lesson: options are not merely leverage. They are precision instruments for shaping risk around known catalysts.

FAQ: iron condor around earnings

Is an iron condor only suitable for neutral views?

No. It is most naturally aligned with a range-based thesis, but it can also reflect a view that the market has overpriced the magnitude of the move, regardless of direction.

What is the real edge in an earnings condor?

The edge, if any, comes from the gap between implied move and realised move, combined with the post-print compression in implied volatility.

What is the biggest risk?

A large directional gap that pushes price through a short strike quickly. When that happens, direction dominates and volatility collapse may not offset the loss.

Why not just sell a strangle instead?

A short strangle collects more premium but carries undefined risk. The iron condor caps that risk via long wings, which can make position sizing and worst-case planning clearer.

Is entering after the open safer?

It can feel more comfortable because direction is revealed, but spreads are often wide and fills uncertain. Execution risk becomes part of the trade.

What should always be defined before entry?

The acceptable maximum loss, a realistic profit-taking threshold, and the level at which the trade thesis is considered invalid.