Awaiting Earnings Adventure
The buzz of earnings season reverberates once again, heralding reports from industry giants like JP Morgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), and Delta (DAL) this week. Prior to the earnings call, implied volatility skyrockets, reflecting market uncertainty. Derivative market activity surges as speculators and hedgers clamor for options, hiking up both implied volatility and options prices.
Once the earnings news is out, implied volatility typically normalizes, settling back to standard levels.
Anticipating Stock Price Movements
Delving into the anticipated price ranges for this week’s reports requires a peek at the option chain. By adding the at-the-money put and call option prices post-earnings, traders glean a ballpark figure for the expected range. While not as precise as intricate calculations, this method offers a practical estimate.
Let’s break down the predictions for individual days:
Wednesday
DAL – 6.3%
Thursday
FAST – 5.2%
KMX – 8.6%
STZ – 3.8%
Friday
BLK – 3.6%
C – 4.6%
JPM – 3.6%
PGR – 4.7%
WFC – 4.7%
Leveraging Expected Moves
Armed with foresight about these expected movements, option traders can craft strategic trades. Bearish traders might opt for bear call spreads beyond the projected range, while bullish counterparts could consider bull put spreads outside the expected spectrum or delve into naked puts for a riskier stance. Neutral traders, meanwhile, might explore iron condors, ensuring that their short strikes remain beyond the anticipated boundaries.
Navigating the High Volatility Terrain
For broader scouting of high volatility stocks, Barchart’s Stock Screener stands as a handy tool. By filtering for factors like total call volume, market cap, and IV percentile, investors can pinpoint stocks with soaring implied volatility, invaluable for strategic planning amid market fluctuations.
Spotting Unusual Activities
Recent unusual options activities in DVN, XOM, INTC, COIN, OXY, and INTC piqued interest. The tide of unusual activities in other stocks ebbs and flows, as captured below:
Please heed that options entail risks, with the possibility of a full investment loss. This content serves educational purposes solely and not as trading advice. Prior to investment decisions, always conduct thorough research and seek guidance from financial advisors.
On the date of publication, Gavin McMaster did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
