Options Pros See One of the Wildest Earnings Seasons Since 2022

Core Insights - Earnings volatility is increasing in both the US and Europe, with investors preparing for significant stock movements on earnings days as the market shows signs of faltering after reaching record highs [1][5]. Group 1: Earnings Volatility - Options on S&P 500 Index members indicate an average expected fluctuation of 4.7% following corporate results, which is close to the highest anticipated move since 2022 [2]. - Actual stock fluctuations after earnings have peaked in the US last quarter and have been trending higher since 2021, with similar trends observed in Europe [4]. Group 2: Market Conditions - The increase in options prices reflects challenges for investors, particularly in a market characterized by rare drops, such as a 2.7% decline following tariff threats from President Trump [3]. - The current environment is described as a "macro catalyst vacuum" due to the government shutdown, leading to stretched positioning in single-stock options [5]. Group 3: Investor Sentiment - Investors are anticipating that stock-specific narratives will drive volatility in the near term, with option prices rising in expectation of this volatility [6]. - The rally in stock prices has been primarily led by high-flying AI and tech stocks, raising questions about valuations and future earnings outlooks [4].