Event risk
Definition · Level 4 · Naked options
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The danger that a scheduled or surprise event, such as earnings, a court ruling or a takeover bid, moves the price in one jump.
Example
“Closing the straddle before the report: I don’t want the event risk.”
Where Tradecraft teaches it
Level 4 · Naked options, in the lesson “Short gamma, gaps & tail risk”: Why losses accelerate, why a scheduled event can still hurt after volatility drops, and what tail risk means.
Related terms
- Tail riskExposure to rare, extreme moves far beyond normal daily swings: the losses that dominate a premium seller’s lifetime profit and loss.
- Blow-upLosing all or most of an account in a single event, usually from oversized short-vol or leveraged positions.
- Borrow cost in option pricesIn a hard-to-borrow stock, short sellers pay the fee through the options: puts trade expensive and calls cheap compared with parity at normal…
- Calendar Spread – CreditBuy the near-term option and sell the longer-term one at the same strike.
- Call Ratio SpreadBuy one call and sell two higher-strike calls.
- Delta hedgingTrading the underlying (or futures) to offset a position’s delta, so small moves barely change the profit and loss; it leaves gamma, theta and vega.