It’s that time of the year again: earnings season…

And while the mainstream loves to speculate and bet on company earnings…

Yesterday, we saw exactly WHY I use my overnight earnings strangle.

In case you are new to strangles…

A strangle is an options strategy you might use when you are betting on a big move higher or lower for a stock…

Meaning, regardless of if you are right or wrong, as long the moves in one direction… you can still win.

And earnings reports are some of the most common catalysts for these kinds of big moves.

To pull off a winning earnings strangle, you have to…

• Pick the right strike price for both the puts and the calls
• Pick the right company
• Pick the right expiration date.

But the beauty of a strangle is you can make money regardless of which direction the stock goes.

The point of the trade is to buy a put option and a call option, so you’re covered in the event of either an upside move or a downside move.

To close the trade for a gain, all you need is for the stock to move enough (in either direction) that the price of one of your options rises above the total price you paid for both.

Take a look at NIKE yesterday…

{{#not (or hasWAR hasMIC) }}

In The War Room I recommended an Overnight Earnings Strangle…

I bought the $54 April 2nd Calls…

And the $52 April 2nd Puts…

The total cost for both positions was $3.60

So I was covered in both directions.

Take a look at what happened…

Nike got crushed. OUCH!!

The stock opened down about 10% overnight…

BUT because my strangle included the puts…

Not only was I protected…

But I actually scored a 68% winner!

Even though Nike got killed, we sold the call/put combo for $6.00.

So, even as Nike was getting clobbered, War Room traders locked in a killer overnight winner.

That’s not guessing… or hoping…

THAT’S SMART TRADING.

One thing to note…

If the underlying option is predicting a huge move, then you likely will not make money, because the option will already be very expensive.

What you want to look for is a situation where the market is NOT expecting a huge move and has therefore underpriced the options. That’s where a surprise in earnings can lead to a sizable move.

You also need to know companies’ official expected earnings and unofficial “whisper numbers” (which represent what the market is really expecting).

And lastly, you need to know the technical support and resistance levels.

That due-diligence is precisely what I do for you inside The War Room.