Option Markets are Predicting a ±10.0% Earnings Move
Intel (INTC) is scheduled to release earnings today, October 31, 2024, after the market closes. The option markets are currently pricing in a ±10.0% stock move for INTC after the earnings announcement. That is the highest expectation prior to an earnings release since at least January 2015. In this article, we will analyze the market's current expectation against the results from actual historical earnings moves.
How did historical predictions in INTC compare to actual earnings moves?
In the chart below, the blue brackets indicate what the INTC 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 7.2% over the last 12 quarters. In comparison, the actual average move was 9.9%. That translates to a 2.6% differential between the expected moves and the actual moves.
Expected Earnings Move vs. Actual
Since 2021, Options have Underestimated Earnings Moves 67% of the Time
How Does a ±10.0% Move Measure Up to Historical Stock Moves?
We look at the current INTC expected earnings move of ±10.0% 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 ±10.0% 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 ±6.7% on the day after the release. There have been 7 instances in the last 9 years where the stock moved more than ±10.0% on the day after earnings. The highest single-day move was 26.1% on August 2, 2024. Since 2015, 82% of the actual earnings moves were less than 10.0% (in either direction).
18% of Historical 1-Day Earnings Moves were above 10.0%
Earnings Gaps
INTC has averaged an opening gap of 6.0% after earnings. The largest opening gap over the last 9 years was 24.5%, which would be 14.5% higher than the current implied earnings move. 85% of the historical gap moves were smaller than ±10.0%, up or down.
15% of Historical Earnings Opening Gaps were above ±10.0%
Historical Probability of Touch
In 9 of INTC's last 16 earnings dates, the stock price moved beyond ±10.0% 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 August 1, 2024, when the stock dropped 29.7% to the low of the day.
56% Historical Probability of Touch for ±10.0% Move
Conclusion
Based on history, there is a decent chance (56%) that, at some point during the day, the stock will make a move beyond ±10.0% from the previous close. However, a ±10.0% move close-to-close is more rare, occurring in only 31% of instances. The chance that the stock makes an opening gap move greater than ±10.0% is 31% historically.
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