Earnings Season Report: This Week 4 Has Been Better for Options Owners

Earnings season starts two weeks after quarter-end, at either mid-January, April, July or October, and runs for six weeks. Currently, we are starting week five of the October earnings season. ORATS watches the implied earnings move in a stock and compares that to the actual move after earnings are announced.

Options prices imply an ‘earn move’, either up or down, in the price of a stock that can be quantified. Comparing the implied moves to the actual moves shows how options owners are faring and can point to patterns as we progress through earnings season.

To date with 89% of companies we track reporting, the fourth week that just passed was very different the previous three.

Putting some numbers up for comparison:

October’s week 4 saw 43% of stocks move more than the options market expected with a ratio of moves to expected at 114% (14% over expectation). October’s week 1 saw only 26% of companies post earnings moves greater than expected. Week 2 had only 30%. This week 3 had 37% winners.

Historical average week

Historically, as we previously reported, week 4 has been much kinder to options holders with win rates at 46%, and actual moves divided by implied moves of 108%. Weeks 1 and 2 have been historically weak, and that is what we saw this season.

Historical average week

History has repeated! And, if history is any judge, next week should be a decent for companies reporting earnings.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Matt Amberson

Matt Amberson, Principal and Founder of Option Research & Technology Services. ORATS was born out of a need by traders to get access to more accurate and realistic option research. Matt started ORATS to support his options market making firm where he would hire statistically minded individuals, put them on the floor, and develop research to aid in trading options. He is heavily involved with product design and quantitative research. ORATS offers data and backtesting on a subscription basis at www.orats.com. Matt has a Master’s degree from Kellogg School of Business.

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