Alcoa will start the earnings season off on Monday January 9th after the bell. From then and well into February earnings season will light the fire under dull option contracts.
There are many ways to play earnings announcements. You can buy into earnings and sell just before the close, taking advantage of increased premium being built into the options. You can hold through earnings, with the hope that the stock moves exactly the way you positioned yourself. You can buy the next day as sometimes stocks get over sold or overbought initially and either pull back or bounce after the earnings dust settles.
Earnings can provide the opportunity for some mind boggling gains. I always go back to GOOG's 20% move back in April of 2008 when a $.50 call bought right before the close could be sold for over $50 the next day. That is a 100 bagger, essentially a $100 would be worth $10,000. That is the homerun everyone is looking for when they trade earnings and it is possible.
I would say this: if you are buying out of the money options, always go small. The returns on an earnings trade can be big, but if you play big so can your loss. When your looking at a potential 100 or even 1,000% gain or more, there is no need to put up a large investment. A little dab will do ya.
I will have more as we inch or way closer to Monday.