Volatility has made a roaring comeback! The prior week ushered in a barrage of company reports, and while this week’s lineup is somewhat muted, a constellation of stocks still beckons the interest of astute investors.
The Earnings Roster
This week’s stage features Palantir (PLTR), Super Micro Computer (SMCI), Robinhood Markets (HOOD), Disney (DIS), Uber Technologies (UBER), Caterpillar (CAT), Eli Lilly (LLY), and Amgen (AMGN) all set to unveil their latest financial performances.
The Dance of Implied Volatility
Before a company’s earnings report, implied volatility typically skyrockets as the market grapples with uncertainty. Speculators and hedgers flock, creating a clamor for the company’s options, propelling the implied volatility and consequently, the options’ prices.
Post the earnings reveal, implied volatility generally reverts to normative levels.
To gauge the expected range for these stocks, delve into the option chain and tally the prices of the at-the-money put option and call option. Utilize the first expiry date post the earnings date. While this methodology lacks pinpoint precision, it serves as a reasonably accurate barometer.
Weekly Projections
Monday
PLTR – 13.6%
O – 3.2%
TSN – 6.8%
…
Understanding Options Activity
INTC, AMZN, MSFT, TSLA, MU, and PG all witnessed atypical options activity in the past week.
Beneath the surface, various other stocks exhibited unusual options activity as well.
It is paramount to remember that options carry inherent risks, and investors can face a 100% loss on their investment. This narrative is designed for educational purposes exclusively and does not constitute a trading recommendation. Always conduct thorough due diligence and consult with your financial advisor before committing to any investment decisions.