JP Morgan Chase & Co. (JPM) just reported earnings on October 12, 2018, before the market opened. Earnings Per Share (EPS) was reported at $2.34, after analysts had expected $2.25 per share. As a result, JPM opened up +2.1%, but dropped later in the day and closed down -1.1% at 106.95. Since earnings was reported, the stock has traded in a range from 105.60 to 110.83.
Price Volatility Against Expectations
Ahead of earnings, option traders were expecting a ± 3.1% move for this date, so the earnings move of -1.1%represents an undersized move against the market. JPM has only experienced 2 larger-than-expected earnings moves in the last 12 quarters.
Earnings Price Patterns
1 Week After Earnings:For 5 of the last 6 quarters (83%), JPM stock price has gone up in the week following earnings. It has had an average gain of +1.3% during that span.
Earnings Option Strategies
MarketChameleon's option strategy analysis
shows that selling out-of-the-money puts one day after earnings and buying them back one week after earnings had 100%
winning occurrences, for an average gain of +86.4%
. Additionally, selling at-the-money straddles resulted in 75%
winning occurrences, for an average return of +28.2%
Stock and option trading involves risk may not be suitable for all investors. Examples contained within this newsletter are simulated and may have limitations. Average returns and occurrences are calculated from snapshots of market mid-point prices and were not actually executed, so they do not reflect actual trades, fees, or execution costs. This newsletter is for informational purposes only, and is not intended to be a recommendation to buy or sell any security. Neither MarketChameleon nor any other party makes warranties regarding results from its usage. Past performance does not guarantee future results. Please consult a financial advisor before executing any trades.
Note: selling options can result in losses of greater than 100%. Average returns from selling options is calculated based on net change in value against the initial theoretical option value. Prior to buying or selling an option, you should read the Options Clearing Corporation's Characteristics and Risks of Options