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I want to walk you through something I explained recently that matters more than the trade itself: position sizing for earnings plays versus longer-term setups.
If you’ve been around options for any length of time, you know earnings trades can be tempting. The moves are big, the potential returns look juicy and it feels like the next logical step after you’ve nailed a few directional trades.
But here’s the thing — earnings are always lotto plays. That’s not me being dramatic. That’s just how they work. They’re binary. They either pop or they don’t.
And if they don’t, IV crush will eat your premium faster than you can refresh your brokerage app.
This is exactly why you size them differently. Compare that to something like a January LEAPS (expirations that extend beyond one year) on a name you believe in or a debit spread you’re holding for months based on a fundamental thesis.
Those are longer-term plays with different risk profiles. You can afford to give them room.
The OKLL Example
I recently looked at an earnings play using the Defiance Daily Target 2x Long OKLO ETF (OKLL), a leveraged ETF tied to Oklo (OKLO). The setup was clean but expensive if you went straight into OKLO options.
Instead of paying something like $300 for the OKLO option, we could get into OKLL for around $50.
That difference matters. But even at $50, I made it clear: This isn’t a situation where you go all in with your whole IRA or 401(k).
This is a small, defined bet on a single event. You size it so that if it goes to zero, you shrug and move on.
And if you need proof of how quickly things can change, look at what just happened. OKLL is now trading closer to $9.40 after reaching a 52-week high near $170.
That kind of volatility cuts both ways. If you sized this like a conviction trade instead of a short-term event play, the drawdown would be devastating.
A Real-Time Reminder From OKLO
OKLO reported Q4 2025 earnings on Tuesday. As of today, the stock is basically flat.
But the real story is what happened to options pricing…
Implied volatility collapsed immediately after the event.
If you bought $60 OKLO calls expecting a big upside move, you’re likely sitting on a big loss today even with only a modest move in the stock.
That’s IV crush in action — and it’s exactly why earnings trades need to be treated like lotto tickets.
A Simple Rule You Can Copy
If the trade hinges on one event — earnings, FDA approval, a Fed decision — treat it like a lotto ticket. Keep it small.
If you’re building a position over weeks or months with a thesis that doesn’t depend on a single headline, you can afford to be more aggressive.
So before you place your next trade, ask yourself: Is this an earnings play or a position you’d hold through noise?
Your size should match your honest answer.
To better trading,
Alex Reid
WealthPin
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.Â
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Disclaimer: We develop tools and strategies to the best of our ability but no one can guarantee the future. There is always a risk of loss when trading. Past performance is not indicative of future results. The trades expressed are based on historical backtested examples. From 1/1/2025-1/1/2026 the win rate was 63.1%, 11% average return (winners and losers), average hold time of 5 days with a profit factor of 2.74.
