For options traders, being able to understand volatility is one of the most important factors in the success or failure of any options trading strategy. (Which might explain why one trader in New York has selected a VOLATLTY vanity license plate) With that in mind, two options strategists from Goldman Sachs recently explained how to trade earnings-day volatility in a special "Striking Price" column for Barron's. According to John Marshall and Maria Grant of Goldman Sachs, the latest earnings season was "one of the most volatile in the past 10 years for many stocks" -- and volatility is likely to increase during future earnings seasons:

Heading into 2008, it's more likely that options traders will be deploying long volatility strategies ahead of earnings events and other known catalysts in the hopes of profiting from large movements in the underlying stock. Is this a good idea? It remains to be seen. Pete Stolcers of the 1 Option blog has posted about the difficulty of trading options during earnings season, and Adam Warner of the Daily Options Report even questions whether "options look especially pumped" ahead of earnings, especially for names in the financial sector.

 [image: Memento Mori? by Vidiot on Flickr]

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