Earnings Options Volatility: Oracle Beats on Top and Bottom Lines as Cloud Revenue Jumps

Stock prices may see larger-than-normal moves during earnings season, making it a potentially attractive time for options traders. For investors looking to trade against these moves, you should always keep track of how the options might shift after their earnings. Here are the top earnings and volatility for this week:

-Earnings Date: June 12, 2023

-Implied Move: 6.9%

-Absolute Average Actual Move for the past 4 Quarters: 4.0% (Market Chameleon)

-Absolute Average Actual Move for the past 12 Quarters: 4.7% (Market Chameleon)

Option Valuation Relative to Absolute Average Actual Move for the past 4 Quarters: Options are pricing in a move that is higher than the average actual move for the past 4 quarters, indicating that they are overvalued.

Oracle reported quarterly earnings of $1.67 per share which beat the analyst consensus estimate of $1.58 by 5.7 percent. This is a 8.44 percent increase over earnings of $1.54 per share from the same period last year. The company reported quarterly sales of $13.80 billion which beat the analyst consensus estimate of $13.73 billion by 0.51 percent. This is a 16.55 percent increase over sales of $11.84 billion the same period last year.

Oracle Q4 Cloud Revenue $4.4B, Up 54% YoY; Cloud Infrastructure Revenue Up 76%, Cloud application Up 45%, Fusion Cloud ERP Revenue Up 26%, NetSuite Cloud ERP Up 22%.

Here are the top earnings volatility reports by the highest options volume:

Before significant corporate events such as earnings announcements, product launches, or clinical trial results, implied volatility tends to increase. However, after the news has been released, the implied volatility can drop significantly due to the sudden clarity in the market and the stock price reaction to the news. This phenomenon is referred to as IV crush.

IV crush can lead to a decrease in option prices because the Implied volatility is lowered dramatically. This decrease in option prices due to IV crush can be a risk for options traders who have purchased options at a higher price with the expectation of making a profit from a significant move in the underlying stock price. Conversely, IV crush may not be as prevalent if the option is undervalued and the stock price moves drastically, which can pose a risk for option sellers. It's important for traders to be aware of IV crush and factor it into their trading strategy when considering options trades around significant corporate events.

Not all options are affected equally by an IV crush. IV crush affects short-term option prices more than long-term option prices.

Nonetheless, it's important to note that trading options always involve risks, and investors should consult with a financial advisor before making any trades.