Earnings announcements create a unique environment for option sellers. Implied volatility spikes as the market prices in potential price movement from earnings results. For traders executing the continuous wheel strategy, earnings week represents the single most lucrative opportunity to collect massive premiums while playing both sides of the market simultaneously.
When a stock you're already trading announces upcoming earnings, option premiums can inflate dramatically compared to normal weeks. A covered call that typically brings in $0.27 premium might suddenly command $1.30 for the same time frame. Cash-secured puts see similar premium expansion. This volatility expansion creates the opportunity to collect several weeks' worth of normal premium in just a few days of exposure.
This article examines a real-world earnings week trade on Marvell Technology (MRVL), where a cash-secured put assignment combined with elevated covered call premiums positioned the trader to collect over $500 in a single week from bilateral option positions. The key to capitalizing on this opportunity lies in systematic tracking, accurate cost basis calculation, and understanding when earnings-related premium expansion makes aggressive positioning worthwhile.
Why do option premiums spike before earnings? The mechanism is straightforward but powerful for those who understand how to capitalize on it.
Earnings announcements introduce significant uncertainty about future stock price. The market doesn't know whether the company will beat or miss estimates, what guidance will look like, or how investors will react to the results. This uncertainty gets priced into option premiums through elevated implied volatility.
In the MRVL example, normal weekly at-the-money covered calls were generating $0.27 to $0.60 in premium. The week before earnings, that same strike was offering $1.30 for just five days of exposure. The upcoming March 2nd earnings report created a massive volatility expansion that nearly tripled available premium.
The clearest way to identify earnings-related premium expansion is comparing time value across different expiration cycles. Looking at MRVL's $45 strike covered calls:
| Expiration | Days to Expiration | Premium Available | Premium per Day |
|---|---|---|---|
| March 3 (5 days) | 5 days | $1.30 | $0.26 |
| March 10 (12 days) | 12 days | $1.75 | $0.15 |
| March 17 (19 days) | 19 days | $2.05 | $0.11 |
The five-day expiration captures the earnings announcement on March 2nd. Those five days command $1.30 premium, while the additional seven days beyond that (from day 5 to day 12) only add $0.45. The additional seven days after that add just $0.30. The lion's share of available premium concentrates in the brief period surrounding the earnings event.
Elevated premiums come with elevated risk. Earnings announcements can create gap moves that blow through strike prices that seemed safe the day before. However, for traders using the continuous wheel strategy at their cost basis, this risk is manageable.
If you're selling covered calls at your true cost basis (the price you paid for shares minus all premium collected), assignment means you exit the position at breakeven or better. The massive premium collected provides substantial cushion against adverse moves. Similarly, cash-secured put assignments at inflated premium levels mean you're acquiring shares with significant premium collected upfront, immediately lowering your effective cost basis.
The previous week's cash-secured put on MRVL was assigned when the stock closed at $43.85, just below the $44 strike price. This assignment triggered a specific workflow for tracking and position management.
When a cash-secured put gets assigned, the option seller is obligated to purchase 100 shares per contract at the strike price. The mechanics work as follows:
The assignment notice appears in your brokerage account, showing the share purchase transaction. For paper trading accounts, commission-free execution means the total cost equals exactly the strike price times 100. Real money accounts typically include minimal assignment fees.
Accurate position tracking requires logging both the original put sale and the subsequent assignment as separate transactions. The MyATMM workflow for assignment processing:
Navigate to the MRVL cost basis page and locate the cash-secured put that was assigned. This position should already be in your transaction history from when it was originally sold.
From the transaction dropdown menu, select "Assigned" to indicate this position resulted in share purchase. This changes the transaction from an open option position to a completed assignment event.
Assignment Type: Stock purchase (100 shares)
Assignment Price: $44.00 (the strike price)
Assignment Date: Date the shares appeared in your account
The platform automatically creates the corresponding stock purchase record based on these inputs.
The stock purchase transaction needs to be moved from draft status to permanent transaction history. This ensures it's included in all cost basis calculations and position summaries going forward.
Once the assignment is processed and the stock purchase is logged, delete the original put option record. It's no longer an active position—it's been converted to shares. Keeping the completed put record would create duplicate entries and distort your position tracking.
After processing the assignment, the position summary reflects the new share count and capital deployed:
| Metric | Before Assignment | After Assignment |
|---|---|---|
| Total Shares | 200 shares | 300 shares |
| Total Capital Invested | $9,100 | $13,500 |
| Simple Cost Basis | $45.50 | $45.00 |
| Total Premium Collected | $1,145 | $1,209 |
| Premium-Adjusted Cost Basis | $39.77 | $40.97 |
The assignment increased share count by 100, deployed an additional $4,400 in capital, and slightly improved the simple cost basis (buying at $44 when previous average was $45.50). The premium-adjusted cost basis rose slightly because the new shares came with less premium collected per share compared to the existing position's heavily premium-reduced basis.
While the put was assigned, the covered calls sold the same week expired worthless as planned. With MRVL trading at $43.85, well below the $45 strike, those calls had no intrinsic value and simply disappeared at expiration. The premium collected when those calls were sold was retained, contributing to the total premium collected metrics.
These expiring calls freed up 200 shares to sell new covered calls for the upcoming earnings week, creating the opportunity to establish new positions with earnings-inflated premiums.
With the previous week's activity processed and position status updated, the focus shifts to capitalizing on earnings week premium expansion. MRVL reports earnings on March 2nd, with options expiring March 3rd—capturing the earnings announcement volatility.
The current position holds 300 shares with a $45 cost basis. The premium-adjusted cost basis stands at $40.97 after accounting for all premium collected to date. This creates a clear strike selection framework: sell calls at $45 to ensure no loss if assigned.
Selling at the $45 cost basis means assignment results in a neutral outcome on the shares (purchased average $45, sold at $45), while retaining all premium collected over the position's lifetime. The earnings week $45 calls are offering $1.30 premium for just five days of exposure—more than double typical weekly premium.
| Detail | Value |
|---|---|
| Shares Available | 300 shares |
| Contracts to Sell | 3 contracts (300 shares ÷ 100) |
| Strike Price | $45 (cost basis) |
| Premium Per Contract | $1.35 (mid-point bid-ask) |
| Total Premium Target | $405 (3 contracts × $135 per contract) |
| Commission | $0.65 per contract |
| Net Premium | $403 |
With MRVL trading at $43.85, the at-the-money strike for cash-secured puts sits at $43.50 or $44. The earnings week premium expansion makes even at-the-money strikes attractive:
| Strike | Premium (Bid-Ask Mid) | Premium as % of Strike |
|---|---|---|
| $43.50 | $1.64 | 3.8% |
| $44.00 | $1.68 | 3.8% |
The $43.50 strike offers $1.64 premium for five days of exposure—representing 3.8% return on the $4,350 of buying power required. This translates to roughly 278% annualized return if the same premium could be collected every week (which it can't, but illustrates the earnings week premium expansion).
Selling one contract of the $43.50 put at $1.64 mid-point premium creates the opportunity to collect approximately $163 after commissions. If assigned, the effective purchase price becomes $41.86 ($43.50 strike minus $1.64 premium), well below the current $45 cost basis.
Both positions get established using limit orders at the bid-ask mid-point, queued for market open the next trading day. This approach balances fill probability with price optimization:
Bid-Ask Spread: $1.32 bid / $1.39 ask
Mid-Point: $1.355 (rounds to $1.35)
Order Type: Limit order, sell to open
Quantity: 3 contracts
Time in Force: Good for day (if not filled, reassess next day)
Bid-Ask Spread: $1.60 bid / $1.68 ask
Mid-Point: $1.64
Order Type: Limit order, sell to open
Quantity: 1 contract
Time in Force: Good for day
If both orders fill at the targeted prices, the combined premium collected for the earnings week totals approximately $569:
This represents premium collection from just a few minutes of position management work, targeting over $500 in income from five days of exposure. The earnings week volatility expansion transforms what would normally be a $100-150 week into a $500+ opportunity.
The continuous wheel strategy becomes particularly powerful during earnings week because you can play both sides of the market simultaneously. This bilateral positioning creates multiple win scenarios regardless of earnings outcome.
If MRVL reports strong earnings and rallies above $45:
If MRVL reports disappointing earnings and drops significantly:
If MRVL earnings are inline and the stock trades sideways around $43-44:
The bilateral strategy creates a compounding income effect over time. Each put assignment grows your share count, which increases covered call contract capacity, which increases total premium collection, which further reduces cost basis. The cycle feeds on itself:
Sell 1 covered call: $50 premium
Sell 1 cash-secured put: $60 premium
Total: $110
Sell 2 covered calls: $100 premium
Sell 1 cash-secured put: $60 premium
Total: $160
Sell 3 covered calls: $150 premium
Sell 1 cash-secured put: $60 premium
Total: $210
The weekly premium collected nearly doubles as the position grows from 100 to 300 shares, all while continuously reducing cost basis through accumulated premium. During earnings weeks, these numbers can triple or quadruple based on volatility expansion.
The real power of earnings week premium collection becomes visible in cost basis calculations. Each dollar of premium collected permanently reduces your effective cost per share, creating a growing safety margin.
Your brokerage statement shows simple cost basis: the average price you paid for shares. This number doesn't account for option premium collected. MyATMM calculates premium-adjusted cost basis, which factors in all option income.
For the MRVL position after the put assignment:
| Metric | Value | Explanation |
|---|---|---|
| Total Shares | 300 | Accumulated through multiple put assignments |
| Total Capital Spent | $13,500 | Sum of all share purchases |
| Simple Cost Basis | $45.00 | $13,500 ÷ 300 shares |
| Total Premium Collected | $1,209 | All option income over position lifetime |
| Net Capital at Risk | $12,291 | $13,500 spent - $1,209 premium collected |
| Premium-Adjusted Cost Basis | $40.97 | $12,291 ÷ 300 shares |
The $4.03 difference between simple cost basis ($45.00) and premium-adjusted cost basis ($40.97) represents a 9% cushion created entirely through option income. The stock can drop 9% from your purchase price and you're still at breakeven when premium is factored in.
If the earnings week positions collect the targeted $569 in combined premium, the cost basis impact becomes substantial:
| Metric | Current | After $569 Premium | Change |
|---|---|---|---|
| Total Premium Collected | $1,209 | $1,778 | +$569 |
| Net Capital at Risk | $12,291 | $11,722 | -$569 |
| Premium-Adjusted Cost Basis (300 shares) | $40.97 | $39.07 | -$1.90 |
A single earnings week collecting $569 in premium reduces cost basis by $1.90 per share. That's more basis reduction than many positions see in an entire month of normal premium collection. The earnings volatility expansion creates concentrated cost basis improvement.
As premium-adjusted cost basis drops below simple cost basis, you create an expanding safety margin. With MRVL currently trading at $43.85:
The same stock price that shows a 2.6% loss in your brokerage account actually represents a 7.0% profit when option premium is factored in. After collecting the additional $569 earnings week premium, the premium-adjusted basis drops to $39.07, expanding the safety margin to 12.2% above true breakeven.
Over months and years of executing this strategy, the premium-adjusted cost basis can drop dramatically below purchase prices. Positions that began with $50 cost basis can see premium-adjusted basis drop to $35 or lower through consistent premium collection. This creates enormous downside protection and makes even mediocre stock performance profitable.
Earnings week trading with bilateral positions creates complex tracking requirements. Multiple transactions occur in rapid succession: puts assigned, calls expire, new positions established. Without systematic tracking, it's easy to lose visibility into your true cost basis and position status.
MyATMM provides a structured workflow that ensures every earnings week transaction gets captured:
This systematic approach prevents the most common tracking errors: forgotten transactions, incorrect premium amounts, missed commissions, or duplicated entries.
Manual cost basis calculation becomes increasingly difficult as positions grow and premium accumulates. The MRVL position involved multiple share purchases at different prices, dozens of option transactions collecting varying premiums, and ongoing assignments and expirations. Calculating true cost basis manually would require tracking every transaction in a spreadsheet with complex formulas.
MyATMM automates this entirely. As you log each transaction, the platform recalculates:
These calculations update in real-time as you add transactions, ensuring you always know your current position status.
The platform tracks both simple unrealized gain/loss (based on purchase price) and premium-adjusted unrealized gain/loss (based on true cost after premium). During earnings week, these numbers can diverge significantly.
In the MRVL example:
Your brokerage shows a $345 loss. MyATMM shows the truth: you're actually ahead $864 when premium is factored in. This visibility prevents emotional decision-making based on incomplete data.
With multiple positions open across different expirations (covered calls expiring March 3rd, potentially other calls expiring later weeks), MyATMM's active position view shows all open options in one place. This prevents forgotten positions or missed expirations—particularly important when managing multiple tickers with staggered earnings dates.
The platform generates premium collection reports showing total option income by period: weekly, monthly, quarterly, yearly. After a massive earnings week, seeing that single week contributed $569 to your monthly total provides clear evidence of strategy effectiveness and helps set realistic income targets.
Earnings week represents the highest-premium environment option sellers encounter. Implied volatility spikes create premium expansion that can deliver 3-5x normal weekly income for the same capital at risk. The key to capitalizing on this opportunity lies in systematic execution: identifying earnings dates, comparing premium across expirations, establishing bilateral positions, and tracking every transaction accurately.
The continuous wheel strategy becomes particularly powerful during earnings week because you can play both sides simultaneously. Covered calls at your cost basis eliminate share loss risk while capturing inflated premium. Cash-secured puts at-the-money maximize premium collection, with assignment resulting in favorable effective purchase prices. Together, these positions create income whether the stock rallies, drops, or trades sideways through the announcement.
The $569 in targeted premium from the MRVL earnings week trade illustrates the opportunity magnitude. Normal weeks might generate $100-150 from the same position. Earnings week triples or quadruples that amount for just five days of exposure. Over a year with quarterly earnings, four earnings weeks can contribute as much premium as months of normal trading.
Cost basis impact from massive earnings premiums creates lasting value. A single $569 earnings week reduces cost basis by $1.90 per share on a 300-share position. Multiple earnings cycles can drop premium-adjusted cost basis 10-20% below purchase prices, creating substantial downside protection that persists even after the earnings volatility fades.
Systematic tracking infrastructure makes earnings week trading practical. The transaction volume and complexity would overwhelm manual spreadsheets, but MyATMM's structured workflow ensures every assignment, expiration, and new position gets logged accurately. The automated cost basis calculations show your true position status, preventing emotional decisions based on brokerage statements that ignore premium collection.
Start by identifying earnings dates for stocks you're already trading with the wheel strategy. Compare premium across expirations to confirm the volatility expansion. Establish covered calls at your cost basis and cash-secured puts at strikes where assignment would be acceptable. Track every transaction systematically. The massive premiums available during earnings week represent the most concentrated income opportunity in the continuous wheel strategy, transforming normal $100 weeks into $500+ paydays for the same amount of work.
Options trading involves significant risk and is not suitable for all investors. Earnings announcements can create gap moves and extreme volatility that may result in substantial losses. Selling covered calls during earnings week caps upside potential and does not provide downside protection. Selling cash-secured puts during earnings week can result in assignment at prices significantly above market value if the stock drops sharply on earnings.
Elevated option premiums during earnings week reflect elevated risk. Past premium collection does not guarantee future income or profitability. The bilateral strategy described does not eliminate market risk or ensure positive outcomes in all scenarios. This content is for educational purposes only and should not be considered financial advice or a recommendation to trade any specific security or implement any particular strategy.
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