April Joyner's Reuters article "Options markets send cautiously bullish signal on U.S. stock rally" featuring Matt Amberson from ORATS came out today. Matt Amberson is quoted:
The first-quarter earnings season could also ratchet up market turbulence, especially when smaller, more volatile companies report results, said Matt Amberson, principal at ORATS.
“We’re not out of the woods from a volatility standpoint,” he said.
The perspective on upcoming volatility from earnings is based on the ORATS Earnings Season report. The profitability of options owners on the move after earnings announcement, when the earnings moves are greater than expected, is greatest in weeks three, four and five of the 6-week earnings season.
Already, the earnings moves are greater than the options market elevated expectations for week-one companies, with actual moves coming in at 114% of implied.
Most companies' implied earnings moves, that are derived from the options straddle prices, are elevated versus past earnings actual moves. Below, for example, 5 of 7 companies that report today have straddle implied moves greater than past. Abbot (ABT) implied move of $3.65 is almost double its past move average of $1.92.
The earnings moves from these and many more companies to come should add fuel to the volatility fire experienced by the market recently.