Strategy·Long-term investor··5 min read

Earnings week with a seatbelt

Aggressive put flow on my holding two days before it reported, and the protective puts that turned a guidance miss into a non-event for my year.

The company was reporting Thursday after the close. Tuesday at 2 PM my phone started its little drumroll: one mail, then two more inside the hour. Puts on exactly that name, weekly expiry bracketing the report, sizes that had no business in a quiet pre-earnings tape, the biggest at 7x volume over open interest. Someone was positioning for Thursday to go badly, and they were not being subtle about it.

The research window

Two days is a luxury. I used Tuesday evening properly: news scan, then a Perplexity deep research on the quarter's setup - consensus numbers, what the two competitors that had already reported said about demand, channel checks floating around, and how the stock had reacted to its last four reports. The uncomfortable summary: expectations assumed a re-acceleration that neither competitor was seeing, and the stock had punished misses by double digits twice in the past year.

I liked the company for the next three years. I just had no appetite for a double-digit air pocket on a position that size. Those are different statements, and options exist precisely because they are different.

Buying the seatbelt

Wednesday morning I bought protective puts just below the market, expiring the week after the report, on most of my share count. Implied volatility was already elevated - the flow I'd been alerted to had seen to that - so the protection wasn't cheap. Insurance never is once the neighbors smell smoke. It was still cheaper than the alternative.

Thursday: revenue fine, guidance cut. The stock opened down 14% Friday. The shares hurt; the puts paid back most of the damage. Net, my position was down low single digits through an event that took fourteen percent out of the name - and I never had to sell a share of a company I still want to own in 2029.

The put buyers on Tuesday weren't telling me to abandon the position. They were telling me what Thursday could cost. Hedging is how you agree with the warning without divorcing the company.

If a holding of yours reports this month, watch what the flow does in the last few sessions before the print. An alert on your reporters gives you the two days that make a seatbelt affordable - and reading the prior earnings call transcript tells you what the pre-earnings flow is likely reacting to.