Option Markets are Predicting a ±5.1% Earnings Move
Boeing Company (BA) is scheduled to release earnings tomorrow, October 23, 2024, before the market opens. The option markets are currently pricing in a ±5.1% stock move for BA after the earnings announcement. That is the biggest expectation leading into an earnings release since July 2022. In this article, we will analyze the market's current expectation against the results from actual historical earnings moves.
How did historical predictions in BA compare to actual earnings moves?
In the chart below, the blue brackets indicate what the BA options traders expected the earnings move to be (in either direction), while the red and green bars show the actual moves that occurred over the last 12 periods. On average, traders priced the estimated over/under earnings move at 4.9% over the last 12 quarters. In comparison, the actual average move was 3.7%. That translates to a 1.2% differential between the expected moves and the actual moves.
Expected Earnings Move vs. Actual
Since 2021, Options have Overestimated Earnings Moves 67% of the Time
How Does a ±5.1% Move Measure Up to Historical Stock Moves?
We look at the current BA expected earnings move of ±5.1% and compare it to actual historical stock moves from the 3 different perspectives below:
- 1-day earnings moves using close-to-close prices
- The opening gap move immediately following earnings, from the prior close to the open price
- The largest intraday move, from the previous day's close to either the high price of the day or the low price of the day
The 3 charts below show the current market prediction of a ±5.1% earnings move highlighted in blue, while the green bars show historical earnings moves that were up and the red bars show historical earnings moves that were down.
Actual 1-Day Moves Post-Earnings
Historically, the average earnings move was ±3.6% on the day after the release. There have been 9 instances in the last 10 years where the stock moved more than ±5.1% on the day after earnings. The highest single-day move was 9.9% on July 26, 2017. Since 2014, 78% of the actual earnings moves were less than 5.1% (in either direction).
23% of Historical 1-Day Earnings Moves were above 5.1%
Earnings Gaps
BA has averaged an opening gap of 2.5% after earnings. The largest opening gap over the last 10 years was 6.7%, which would be 1.6% higher than the current implied earnings move. 88% of the historical gap moves were smaller than ±5.1%, up or down.
13% of Historical Earnings Opening Gaps were above ±5.1%
Historical Probability of Touch
In 7 of BA's last 16 earnings dates, the stock price moved beyond ±5.1% at some point during the day -- including moves to the intraday high or intraday low. The most significant move that occurred during this time was on April 27, 2022, when the stock dropped 12.6% to the low of the day.
44% Historical Probability of Touch for ±5.1% Move
Conclusion
Based on history, there is a small chance (44%) that, at some point during the day, the stock will make a move beyond ±5.1% from the previous close. However, a ±5.1% move close-to-close is more rare, occurring in only 25% of instances. And it is even less likely that the stock makes an opening gap move that exceeds ±5.1%, happening in only 6% of cases.
See how Market Chameleon can help you make smarter and more efficient trades!
Contact Information:
If you have feedback or concerns about the content, please feel free to reach out to us via email at support@marketchameleon.com.
About the Publisher - Marketchameleon.com:
Marketchameleon is a comprehensive financial research and analysis website specializing in stock and options markets. We leverage extensive data, models, and analytics to provide valuable insights into these markets. Our primary goal is to assist traders in identifying potential market developments and assessing potential risks and rewards.
NOTE: Stock and option trading involves risk that may not be suitable for all investors. Examples contained within this report 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 report is for informational purposes only, and is not intended to be a recommendation to buy or sell any security. Neither Market Chameleon 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. You can read more about option risks and characteristics at theocc.com.
The information is provided for informational purposes only and should not be construed as investment advice. All stock price information is provided and transmitted as received from independent third-party data sources. The Information should only be used as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments and trading strategies. The Company does not guarantee the accuracy, completeness or timeliness of the Information.
