Option Volatility And Earnings Report For January 26 - 30

Earnings Reports Overview - This week is significant for earnings reports with major companies such as Tesla, Microsoft, Apple, Meta Platforms, UnitedHealth Group, Exxon Mobil, Visa, Mastercard, Chevron, and Caterpillar scheduled to report [1] Implied Volatility Insights - Prior to earnings announcements, implied volatility tends to be high due to market uncertainty, leading to increased demand for options [2] - After earnings announcements, implied volatility typically decreases back to normal levels [3] Expected Price Movements - The expected price range for stocks can be estimated by summing the prices of at-the-money put and call options, using the first expiry date after the earnings date [3] Daily Earnings Reports - Tuesday: UnitedHealth Group (UNH) expected move of 5.4%, Boeing (BA) 5.0%, General Motors (GM) 6.1%, UPS 7.1%, NextEra Energy (NEE) 3.9%, Seagate Technology (STX) 11.2% [4] - Wednesday: Tesla (TSLA) 6.2%, Microsoft (MSFT) 5.4%, Meta (META) 6.7%, ServiceNow (NOW) 8.0%, Lam Research (LRCX) 8.7%, Starbucks (SBUX) 8.0%, AT&T (T) 4.5%, ASML 7.0%, IBM 6.5% [5] - Thursday: Apple (AAPL) 4.4%, SanDisk (SNDK) 14.7%, Altria (MO) 3.5%, Western Digital (WDC) 12.0%, Visa (V) 3.3%, Caterpillar (CAT) 5.9%, Blackstone (BX) 4.7%, Mastercard (MA) 3.9%, Lockheed Martin (LMT) 4.9% [6] - Friday: Exxon Mobil (XOM) 3.1%, Verizon (VZ) 4.1%, Chevron (CVX) 2.9% [7] Trading Strategies - Traders can utilize expected moves to structure trades, with bearish traders considering bear call spreads outside the expected range, while bullish traders may opt for bull put spreads or naked puts [7] - Neutral traders might look into iron condors, ensuring short strikes remain outside the expected range [7] Risk Management - When trading options around earnings, it is advisable to use risk-defined strategies and maintain small position sizes to limit potential portfolio impact to 1-3% in case of larger-than-expected stock movements [8]