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This week's earnings moves vs options expectations and a sneak peek ahead.
2 min read

This week's earnings moves vs options expectations and a sneak peek ahead.

This week's earnings moves vs options expectations and a sneak peek ahead.

The first week of earnings season is mostly in the books, dominated by some big financial and airline names. From a trading perspective it can be useful to look back at what options were pricing versus what actually occurred. Robust data on earnings season moves will eventually tell the whole story, but that won't be available for a few weeks. Anecdotal look backs are somewhat useful to understand how specific trade set-ups in specific names, especially as big tech earnings start to roll in over the next two weeks.

From Monday morning's post we can look back to see how options were pricing this week's moves (expiring Friday) in each of these stocks.

Today's earnings watch: Actual moves since Monday's open vs what options were pricing for this Friday's close (via Options AI).

First, the market. The expected move from Monday's open to Friday's close in SPY was 1.3%. It is down 1.2% as of now. So overall the market is weighing slightly on any stock that reported so far this week. Now the stocks that have reported:

JP Morgan 0.0% (3.0% expected)

Citi -5.0% (3.6% expected)

Johnson & Johnson -3.3% (1.8% expected)

Delta Airlines -4.6% (5.5% expected)

United Health -2.5% (3.0% expected)

Goldman Sachs -2.1% (3.3% expected)

Bank of America -6.6% (3.5% expected)

Wells Fargo -10.5% (3.9% expected)

Taiwan Semi -2.5% (4.1% expected)

Morgan Stanley +2.5% (3.6% expected)

Charles Schwab +0.1% (3.0% expected)

Most of the stocks on the list have moved in line or inside their expected moves. A couple notable exceptions, particularly Wells Fargo which is down quite a bit more than options were pricing.

Hard to draw any particular lessons so early in earnings season but from a trading perspective. Selling the move through outright income generating strategies like Condors would have worked in most cases, as it often does. But defining risk is key because in the case of a Wells Fargo when a stock does go outside its expected move it tends to do so in a big way. Directionally, using a spread with the short strike at the expected move would have also been the right move in most cases, only leaving money on the table in a few instances like a put spread in Wells vs an outright put.

As far as next week, here's a quick look at weekly expected moves for the next 7 days on some interesting names set to report, including Tesla and Netflix, via Options AI:

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