Get Ready For A Wild Earnings Season

Discussion in 'Options' started by Matt_ORATS, Apr 3, 2020.

  1. Matt_ORATS

    Matt_ORATS Sponsor

    With the start of earnings announcements two weeks away, the magnitude of expected moves in stocks is climbing according to options prices around earnings expirations.

    Pictured below are the S&P 500 weighted average of components implied earnings move. Investors are grappling with earnings estimates and this is being reflected in the options market uncertainty reflected in the earnings bump in implied volatility.

    [​IMG]
    The current average of 5.6% means that on average the stocks in the S&P 500 are expected to make this move on earnings announcement. That is a full percentage point above historical averages.

    An example of how we isolate earning moves is with component stocks is AAPL that reports on April 28th. The first expiration after earnings is May 1st and that implied volatility is significantly higher than the previous April 24th expiration.

    [​IMG]

    ORATS has a process that produces the term structure with earnings moves that fits the implied volatility most rationally. In this case the earnings move for AAPL is found to be 7.6% which produces an additional 5.7% for May 1, 4.6% for May 8, and so on.

    More here: https://info.orats.com/earnings
     
  2. Thanks for posting this Matt
     
    .sigma and Matt_ORATS like this.
  3. great post, much appreciated. Would love an update in the future.
     
    Matt_ORATS likes this.
  4. TBT, how are you seeing the Jump vol vs. implied move?

    I haven't done any math, so my guess is that the implied move is drowning/overpowering the jump vol. What do you think?
     
  5. Lol I love how you always call me TBT. Maybe I should change my handle to "Throw back Thursday".

    Implied moves are insane this quarter. If matt plotted this on RUT for example, you would see we are really high up on the chart. Many small cap stocks implied move are like 2-3x the average move. However, the juiced up vol is certainly valid
     
    .sigma likes this.
  6. LOL - sorry man, I need to stop doing 3 things at the same time!

    I don't know how to interpret the implied moves in this context...I'm thinking market vol might overwhelm if the market continues to trend downwards...

    Are you providing access to your earnings analysis tool?
     
  7. Matt_ORATS

    Matt_ORATS Sponsor

    The markets are so wide in the RUT that, our component average is not meaningful.
    Here are the components of the DIA showing a large uptick in implied earnings recently:
    [​IMG]
    https://gyazo.com/4b95320892891117036e5ef918a2887d
     
  8. Hey Matt, can I access this chart above as a member? You guys have so many features, I am not to sure why I only limit myself to the API. Would you mind sending me the link to this platform?
     
    Matt_ORATS likes this.
  9. So you know that things will be volatile up or down... But have no idea which way. So how to attempt to profit other than guessing? And hoping you're right?

    Set wide TP and tight SL?
     
  10. Matt_ORATS

    Matt_ORATS Sponsor

    Go to wheel.orats.com and under Indicators is the charting tool.
    Let me know if this works for you.
     
    #10     Apr 4, 2020