🎓 Lesson 11: High-Conviction Earnings Plays – Mastering Vega, Rho & LEAPS with the 12-Pillar Framework
📌 Overview
In intermediate options trading, success isn’t just about timing volatility — it’s about combining strategic Greek management (Vega & Rho) with directional conviction rooted in institutional-grade analysis. In this lesson, we reveal how to execute a LEAPS call option trade (Δ 0.80+) ahead of earnings, filtered through our elite 12-Pillar Alpha+ Stock Selection Framework. This transforms a high-risk trade into a probability-weighted earnings strategy.
⚙️ Part 1: Understand Vega & Rho in Context
✅ Vega – Sensitivity to Implied Volatility (IV)
- Measures premium change for every 1% change in IV.
- Most impactful in ATM, long-dated options.
- Rises in the weeks leading up to earnings; crashes after (IV crush).
- Goal: Buy before IV peaks → Sell before earnings.
✅ Rho – Sensitivity to Interest Rates
- Measures option premium change per 1% interest rate shift.
- Impactful in LEAPS or deep ITM calls.
- In a rising rate environment (e.g., Fed tightening), Rho boosts call value slightly.
- Great for long-term bullish LEAPS held through macro trends.
🧠 Part 2: The 12-Pillar Alpha+ Stock Selection Framework
Before choosing a stock for your LEAPS + earnings strategy, apply all 12 pillars:
| Pillar | Criteria |
|---|---|
| 1 | Multi-year technical bottom with RSI <30 + MACD valley bounce |
| 2 | Accumulation confirmed by rising OBV or Accum/Dist |
| 3 | Weekly/monthly chart bullish divergence |
| 4 | +5% institutional inflow (e.g., BlackRock, Fidelity) this quarter |
| 5 | C-level insider buying (CEO, CFO, Directors) in recent weeks |
| 6 | Upgraded price targets well above current price |
| 7 | Upcoming catalyst: earnings, FDA, launch, guidance |
| 8 | Sector momentum or industry tailwinds (e.g., AI, genomics) |
| 9 | Strong fundamentals: cash flow, margin, debt-to-equity |
| 10 | Liquid options chain, tight bid-ask, high OI & VOL |
| 11 | Volatility setup: IV rising but <70%, ideal for Vega trade |
| 12 | Low float or short squeeze potential (optional bonus alpha) |
✅ All 12 pillars help validate directional bias, ensuring you’re not just trading volatility, but smart money momentum.
📈 Part 3: Real-World Strategy Example – TEM Earnings LEAPS Trade
📌 Stock: TEM (TEMPUS AI)
- Current Price: $71.28
- Earnings Date: August 5, 2025 AMC ( after market close )
- Today’s Date: June 14, 2025
- IV Rank: 38% → climbing
- Technical: RSI = 43 & rising, MACD crossover on weekly chart
- Institutional Buying: +6.7% (Fidelity, Vanguard)
- Insider Buying: CEO & 2 Directors bought 60,000 shares total in past 2 weeks
- Analyst Target: $70 avg, high estimate: $85
- Sector: Genomics, recovering post-rotation
- Catalyst: Earnings + new platform launch announcement
Learn more about Tempus AI
🛠️ Option Setup – ITM LEAPS Call
| Parameter | Value |
|---|---|
| Strike | $55 ( 30% ITM below current stock price ) |
| Expiration | Jan 15, 2027 |
| Premium | $36 |
| Delta | 0.78 |
| Breakeven by expiration date | $91 |
| Strategy | Buy now → Sell at 65 -100% profit |
📊 Trade Plan
- Entry Date: June 16, 2025
- Exit Target Date: Aug 6 (after earnings jump)
- Target Price: $80–$85
- Expected LEAPS Premium Gain: 65 – 100%
- Backup Plan: If stock stalls, hold LEAPS post-earnings due to long duration, deep ITM ( In The Money ) and bullish fundamentals
See more of the LEAPS strategy in our Stock Options Analysis & Trading Strategies.