Earnings-Day Price Moves Are the Largest Since ‘09, Goldman Says

(Bloomberg) -- The average intraday move for S&P 500 stocks after earnings is the highest on record since 2009, according to analysis from Goldman Sachs.

Analysts led by John Marshall said that after 85% of the companies have reported earnings, the most unusual feature of the stock reactions has been the large ranges the stocks have traded in. Marshall highlighted that while the average stock has had an earnings day move of 4.2%, the intraday range has been 6.4%.

Volatility has subsided significantly for the average S&P 500 stock since the reporting season began with average one-month implied volatility dropping to 33 from 73 in early April, but Goldman continues to view selling options as an attractive strategy. The index has rallied close to 18% since April 1 and the average options implied earnings day move started out at about 13% in mid-April. That surpassed the anticipated average move of 12% that was exhibited ahead of the October 2008 reporting season according to their analysis.

Throughout earnings season both Goldman Sachs and strategists from Susquehanna have touted selling options as an attractive strategy. More specifically they have recommended overwriting, a strategy of selling call options against long stock positions. The strategy can also be attractive to investors who believe near-term gains will be capped due to continued economic uncertainty surrounding the impact of the Covid-19 pandemic.

Currently, the average options implied earnings day move has dropped to 8.6% according to the analysts and while earnings have been generally disappointing relative to weak expectations, the moves reflect the fact that there has been limited new information given by companies, Goldman said.

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