IV before Earnings Season

Discussion in 'Options' started by spindr0, Jan 2, 2007.

  1. IV tends to start inflating somewhere around 4-6 weeks before earnings are released. With 4th quarter releases starting up in 3 weeks, an awful lot of them are depressed and barely moving up. Any thoughts as to why the typical quarterly pattern is flat lining?
     
  2. Actually, i was wondering that myself. long holidays season, maybe? I've been long vega positions on YHOO and DNA for 2 weeks now, and - nothing (yet?). vols graph flat as the sea of some dream-island. and in the meantime, theta is eating me alive.
     
  3. JAN qtr is always diff from the rest , because many stocks reporting later then usually. Usually about 70% done reporting by end of reporting ( this) month , but its not the same for JAN ( add 1.5-2 weeks).
     
  4. I think once we start trading again after the holiday lulls the in betweeners wil start picking up IV. I have positions on waiting for that ratchet up in IV as well and it is has been a little flat the last two weeks, especially with many issues rising on low volume.
     
  5. xyannix

    xyannix

    It could be that the IV chart is showing front month and the IV rise only happens once the front month is the month of the earnings release?

    For example, The Jan options are staying flat because the earnings announcement will be lets say Jan 30th, after they expire. It is really the Feb option that needs to be looked at. I think most IV charts only show the front month.

    The question is, does the Feb options IV start increasing 4-6 weeks before or does it only start the increase after Jan expires.
     
  6. Quote from IV Trader:

    JAN qtr is always diff from the rest , because many stocks
    reporting later then usually. Usually about 70% done
    reporting by end of reporting ( this) month , but its not the
    same for JAN ( add 1.5-2 weeks).
    ---------------------------------------------------------

    I've looked at this from every which way - except back at last January.
    The IV charts reflect your observations.

    Thx
     
  7. Quote from xyannix:

    It could be that the IV chart is showing front month and the IV rise only happens once the front month is the month of the earnings release?

    For example, The Jan options are staying flat because the earnings announcement will be lets say Jan 30th, after they expire. It is really the Feb option that needs to be looked at. I think most IV charts only show the front month.
    -------------------------------------------------------------------------

    That's a good suggestion but I'm looking at Jan. options for Jan cycle releases and Feb options for Feb cycle releases.

    IV Trader's delayed reporting makes sense but there are a good number of companies that usually inflate (that are reporting 3 weeks from now) and they're not picking up much, yet.

    Back to number crunching for me :->)
     
  8. xyannix

    xyannix

    One more thought / question.

    Take a company like DNA. Its IV ran up in Sept - Oct from 23 to 33.

    Then nothing really happened by the earnings release so does that mean this quarter we should expect it to rise again to 33 or will the IV rise only slightly.

    Another example would be ISRG. will we see 70 IV on the Feb contract?

    How many quarters of no earnings bounce does it take to remove the fear factor (spike in IV) pre release?

    spindr0 - I would love to know the answer too. This is a strategy I love but can't seem to perfect it.
     
  9. x , with all those non-trading days , you DNA entry was a bit to early IMO. I got in on Fri before NY
     
  10. xyannix

    xyannix

    Im sorry, I didnt mean that I entered the trade three months ago.

    I meant to say just because there was an IV spike last quarter does it mean this quarter will also have one.

    I am thinking that maybe an IV spike only happens when the last quarter had an increase in real volatility (meaning the stock moved sharply) thereby creating a fear it will do it again.

    But if the last time it didnt move sharply then the options probably wont be so overpriced next earnings season.

    I hope this is clearer.
     
    #10     Jan 2, 2007