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Stocks may see sharp moves ahead of major retail earnings
An options volatility review for Aug 17 to Aug 21 estimates expected post-earnings ranges by combining at-the-money call and put prices for the first expiry after each report.
A week focused on retail earnings is set to draw unusually heavy options activity, as implied volatility typically rises ahead of results when investors are unsure how the market will react. Yahoo Finance notes that speculators and hedgers often increase demand for options into earnings, which can push up option prices, and that implied volatility often normalizes after the announcement.
The report highlights several companies scheduled to report during Aug 17 to Aug 21, including Walmart, Home Depot, Target, and Alibaba. It describes an approach to estimate an expected earnings move by adding the at-the-money put and at-the-money call prices from the option chain for the first expiry date after the earnings release.
It also points to trading implications around those expected ranges, including using risk-defined strategies like bear call spreads and bull put spreads outside the projected move, and keeping short strikes outside the expected range when using iron condors. The analysis says that among the previously reviewed set, 3 out of 9 stocks stayed within the expected range, while 4 out of 9 moved higher after their announcements.
The article further says TSLA, NU, NEM, NVDA, and MRNA saw unusual options activity last week and reiterates that options carry risk, including the possibility of losing 100% of an investment. It emphasizes position sizing discipline, suggesting that if a trade hits a full loss, it should not have more than a 1% to 3% impact on a portfolio.