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.

SPYcImpEarnMove

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.

AAPLearnMovemonies

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.

Sign up for the earnings report for $100 per month here: https://info.orats.com/earnings

 

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