How to Better Measure the Implied Earnings Effect (IEE) This Earnings Season

Matt Amberson, Principal and Founder of Option Research & Technology Services (ORATS), recently joined The Option Block podcast on The Options Insider Radio Network to discuss volatility and the launch of the new futures contract (ticker symbol:VLQ) based on the Nasdaq-100 Volatility Index (VOLQ®).

Listen in as Amberson discusses how to use VOLQ in various trading strategies. “VOLQ focuses on the options that practitioners, hedgers, and traders use most since it isolates ATM vol and fosters stronger comparisons to other measurements of the volatility surface,” said Amberson.

“We like the VOLQ at ORATS because we can compare our surface calculations and get important information. For example, our way out-of-the-money five deltas implied volatility reading compared to the VOLQ showed increased speculative call buying recently, purportedly to a ‘whale’ but more like a ‘dolphin!’”

Amberson continued, “Earnings season is starting this week….many of the stocks last quarter had seen such tremendous stock price runs that earnings announcements didn’t seem to matter as much as usual. The implied earnings effect (IEE) that measures how much a stock is expected to move in relation to its normal expected daily move, is way down currently for the upcoming earnings season. We measured the weighted average of the components of the Nasdaq-100 Index (NDX), and the IEE is down around 2 (meaning the earn move is about 200% of normal moves). It has only been this low in Covid crash and a blip in early Feb ’19.”

Listen to the podcast here:

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