Pick a stock reporting soon to load the move the options market is pricing in for its earnings, or enter your own numbers for any stock. Then compare it with how the stock really moved on its last reports.
Before a company reports, options traders bid up the options that expire just after the report. The extra price they pay is the move the market expects, usually shown as a plus or minus percentage.
Stocks finish inside the implied move more often than not, but not always. Comparing the implied move with how far the stock really moved on past reports shows whether the market tends to overprice or underprice that company’s earnings.
The formula
Expected move ($) = Price × Implied move %
Expected range = Price ± Expected move
From a straddle: Implied move % ≈ Straddle price ÷ Stock price
Worked example
A $100 stock with an implied earnings move of 6% is priced to finish between about $94 and $106 after the report. If the at the money straddle costs $6.50 instead, the implied move is about 6.5%, a range of about $93.50 to $106.50.
Earnings Expected Move questions
Where does the implied move come from?
It is worked out from the prices of the options that expire right after the report. When those options are expensive, the market is expecting a big move.
Why does the stock sometimes move far more than implied?
The implied move is an average expectation, not a limit. A big surprise in results or guidance can move a stock two or three times the implied amount.
Does a big implied move mean the stock will go up?
No. The implied move says how far, not which way. Use the Earnings Calendar setup and the past reactions for a view on direction.
Why do I need an account to see past reactions?
Past reactions come from StreetAlpha’s own earnings tracking, which is free with an account.
For informational and educational purposes only. Not investment advice, and not a recommendation to buy or sell any security. Results are estimates from the numbers you enter.