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Unveiling Volatility: A Deep Dive into Earnings Reports for March 11 – 15

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Market Anticipation:

Steering through the dwindling earnings season waters, our gaze fixes on the shining stars set to report this week: Adobe (ADBE), Oracle (ORCL), Lennar (LEN), and UiPath (PATH). Before the curtain lifts on their earnings stage, the market’s heartbeat quickens in an intricate tango of speculation and hedging. They dance a duet swirling with implied volatility, a waltz of uncertainty that raises the price of options.

Post-Earnings Symphony:

Once the confetti settles and earnings are announced, the volatility recedes back to its quiet rhythm, akin to a storm calming into a gentle breeze.

To gauge the anticipated movements of these stocks, we turn to the option chain, summing up the prices of at-the-money put and call options with the closest expiry date post-earnings. While not as precise as a thorough analysis, this method crafts a fairly accurate prediction.

Time to Unveil the Expected Range:

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Monday

ORCL – 8.7%

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Tuesday

ONON – 14.0%

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Wednesday

PATH – 17.1%

LEN – 5.5%

DLTR – 8.7%

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Thursday

ADBE – 8.4%

DG – 9.2%

ULTA – 8.1%

DKS – 9.4%

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Friday

Nothing of note

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Traders can utilize these projected movements to craft their strategies. Bears might sniff out opportunities by selling bear call spreads, while bulls might opt for bull put spreads or dare to dabble in naked puts for a wilder ride.

Neutral traders could consider iron condors, but best play it safe by keeping the short strikes well outside the projected ranges.

When venturing into the options arena post-earnings, it’s wise to stick to tactics with clearly defined risks and restrain position sizes. A larger-than-expected move shouldn’t shake your portfolio by more than 1-3%.

Scanning the Implied Volatility Landscape:

To unearth stocks shimmering with high implied volatility, Barchart’s Stock Screener acts as our trusty map. Filtering through those with total call volume over 2,000, market cap exceeding 40 billion, and IV Percentile surpassing 70%, we unearth a trove of potential treasures sorted by IV Percentile.

For a more detailed treasure hunt of option trades this earnings season, this article serves as your treasure map.

Reflections on Last Week’s Earnings Acts:

As the curtains fell on last week’s earnings show, the spotlight shone on a select few:

SE +5.6% vs 17.6% expected

GTLB -21.0% vs 18.4% expected

CRWD +10.8% vs 11.9% expected

TGT +12.0% vs 7.2% expected

CPB +0.8% vs 4.6% expected

JD +16.2% vs 9.4% expected

AVGO -7.0% vs 8.3% expected

COST -7.6% vs 4.2% expected

MRVL -11.4% vs 11.6% expected

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Of the cast of nine, five elegantly hewed to the script.

Shifting Tides in Open Interest:

Last week saw a dance of unusual options activity in WMT, GOOGL, TSLA, PINS, PBR, CSCO, and SOFI. Other stocks, too, felt the winds of change in open interest.

As the curtain falls on this performance, remember: options are a high-wire act, wagering all or nothing. These insights are but a guiding star in the night sky of your investment journey – navigate wisely.

On the date of publication, Gavin McMaster had no positions (either directly or indirectly) in the securities mentioned. Information and data in this article are for informational purposes only.

The thoughts and opinions expressed herein belong to the author and do not necessarily mirror those of Nasdaq, Inc.

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