Tech earnings season: How will it reshape the industry landscape?

Views 21.7M Contents 599

Earnings Season Options Playbook (1): Should I Be a Buyer or a Seller?

Moomoo Learn joined discussion · Jan 21 22:52

Starting next week, U.S. stocks will officially enter the 2025 Q4 earnings season. And for most investors, one question immediately becomes front and center:

How to use options to “trade earnings” effectively?

The Moomoo App offers a rich set of tools that can help you improve your odds when trading around earnings—and avoid common pitfalls. Starting today, we’re launching a new course series, which is designed to help investors find higher-probability opportunities in the high-uncertainty environment of earnings season.

At the end of this note, you can take a easy quiz to deepen the understanding of today's topic.

To improve your win rate during earnings season, you need to understand two things clearly for every stock you trade: (1) the stock’s earnings behavior pattern, and (2) the pre-earnings state of its options market.

On Moomoo, this comes down to three essential tools:

– Expected Move

– IV Crush

– Volatility Analysis

Below is a practical framework built on these three core product tools.

1. EM vs. AM (Expected Move vs. Actual Move)

First—what is EM (Expected Move)?

Expected Move reflects the options market’s implied expectation for how much the stock could move after earnings. In other words, it’s the move that has already been priced in by options market makers.

On moomoo App, you can easily find a stock's EM statistics before its earnings print. Select a stock, click the "Options" and "Earnings", then find the "Expected vs Actual Move".

Earnings Season Options Playbook (1): Should I Be a Buyer or a Seller?

So what does EM mean for option traders?

In plain words, if an investor buy options to bet on earnings—especially short-dated options—the stock’s actual post-earnings move must exceed the Expected Move for the investor to have a real chance of profit. Otherwise, the buyer is likely to lose money.

That’s why a useful statistic:

Across past earnings events, how often did the Actual Move (AM) exceed the Expected Move (EM)?

This gives you a rough estimate of the historical “win rate” for buying options into earnings.

Note that although EM is generally positively correlated with implied volatility (IV), But this does not naturally mean stocks with high-IV always have a lower “options buyer” win rate.

For example:

– Tesla often has historically shown high IV, yet in its past 14 earnings releases, 8 times the AM exceeded the EM—a relatively high hit rate.

– JPMorgan, however, typically has lower IV, but in its past 14 earnings releases, only 4 times (this quarter included) did AM exceed EM—meaning it’s extremely difficult to make money simply buying options for earnings.

The bottom line is:

– If a stock has historically seen AM exceed EM more often, then taking the options buyer side around earnings tends to offer a slightly better edge; conversely,

– If AM has typically failed to beat EM, buying options into earnings will more likely end in a loss.

Then comes the question, if a stock isn’t suitable for option buyers… does that automatically mean option sellers should step in?

Not necessarily. To evaluate seller setups, you need another metric: IV Crush.

2. IV Crush

IV Crush describes the common phenomenon where implied volatility drops sharply after earnings.

We don’t need to debate every reason behind it. What matters is:

– Whether IV Crush happens

– How large it tends to be

The historical IV-Crush data is shown on the same page with EM, namely, select a stock, >> Options, >> Earnings, then the IV-Crush statitics is on top of the page, above the EM chart.

Why IV Crush matters for sellers

Selling options before earnings is, in essence, a strategy to capture the volatility collapse.

Over a single day, the time decay (theta) doesn’t have enough time to dominate, and if the stock move doesn’t massively exceed EM, price impact (delta effect) may be limited—so the IV dropping can become the main driver that reduces option premiums and benefits option sellers.

An easy-understandable working conclusion is:

– The larger the IV Crush, the more suitable the stock tends to be for pre-earnings option selling

– The smaller the IV Crush, the less suitable it is for selling

Examples:

– Tech names like software / chips / data-analysis / high-growths often presents large post-earnings IV Crush. The chart below shows Snowflake (SNOW)’s post-earnings IV crush over the past eight quarters, with each drop typically around 15–20 points.

– Traditional sectors—such as consumer, industrials, and energy—often show a smaller IV crush, or even little to no IV crush at all. The chart below shows Boeing (BA)’s IV crush over the past eight quarters. As you can see, IV crush events are rare—most of the time the IV curve before and after earnings is fairly flat, and in one quarter IV even spiked sharply after earnings.

– Some stocks show inconsistent IV crush behavior—sometimes the collapse is very pronounced, while other times it’s barely there. TSMC (TSM) is a good example, as shown in the chart below, 4 times significant IV-Crush while 4 times flat IV curves...

How to find these useful tools on a mobile-phone APP?

You can enter the stock quota page, find the "Company" tab in the middle of the page, then "Financials", and you can see the "Earnings Hub" on the right-hand side.

In the "Earnings Hub", you can find tools like "Earnings Move" and "Expected vs Actual Move".

Putting EM + IV Crush together

At this point we can summarize:

– Whether a stock is suitable for option buying depends largely on EM vs. AM

– Whether a stock is suitable for option selling depends largely on IV Crush

If a stock has low probability of AM > EM, and low IV Crush, …then it’s neither good for buyers nor sellers before earnings—a “double no.” A classic example is often bank stocks.

On the other hand, if a stock has high probability of AM > EM, and large IV Crush, …then both buyers and sellers may find opportunity—a “double yes.” Historically, Tesla and Nvidia (at certain points) have shown this kind of “both sides are tradable” profile.

3. Volatility Analysis (IV Rank / IV Percentile)

Using AM vs. EM and IV crush, we can already make a solid call on whether it’s more appropriate to deploy an options buyer or options seller strategy before earnings. But statistics on IV itself can offer additional clues and serve as a useful cross-check.

Inside Volatility Analysis, one of the most important indicators is: IV Rank / IV Percentile.

This measures where today’s implied volatility sits relative to the past year.

– If IV Percentile is high, current IV is high versus its own history. Given IV’s tendency toward mean reversion, IV may be more likely to fall (or fall sharply) at some point.

– If IV Percentile is low, IV may be more likely to rise later.

We should note that A high IV Percentile before earnings does NOT guarantee IV will crash immediately after earnings. Similarly, a low IV Percentile does not guarantee IV will rebound right after earnings.

So IV Rank/Percentile is not a “sufficient condition”—but it is a valuable reference.

In general: The higher the pre-earnings IV Percentile, the safer it tends to be for option sellers (because there’s more “air” for IV to come down).

Where to find "Volatility Analysis" sector on a moomoo mobile-phone App? You can enter the stock quota page, then choose the "Options" tab, then "Analysis". Slide down to the near-bottom zone, then comes the "Volatility Analysis" functions.

Summary Framework

Using Expected Move, IV Crush, and Volatility Analysis, you can build a practical decision framework for whether a stock is better suited for option buying or option selling into earnings.

Generally speaking:

More suitable for pre-earnings option selling

– Larger Expected Move (EM)

– Larger IV Crush

– Higher IV Percentile (relative to the past year)

More suitable for pre-earnings option buying

– Smaller Expected Move (EM)

– Smaller IV Crush

– Lower IV Percentile

One final point: direction still matters

But, no matter you’re an option buyer or seller, one unavoidable requirement is:

You still need a view on post-earnings direction.

And that’s exactly the hard part—because there is no universal indicator that can consistently predict earnings direction. That’s also what makes earnings trading so difficult—and so fascinating:

Disagreement is what creates trades!!!

Quiz 1: (True or False) If stock X has shown 9 times where the stock price's actual change exceeded the expected move over the past 14 earnings, it would be appropriate to buy a long straddle to bet on a price rally post-earnings.

Quiz 2: (True or False) Jack finds stock Y's historical IV-Crush was 10 points and now its IV percentile is 85%, a suitable pre-earnings strategy is to sell an OTM put.

Feel free to wright your answers to the two quiz in comments.

In the next two episodes, we’ll cover:

Earnings-season option seller strategies

Earnings-season option buyer strategies

We’ll also share patterns and practical experience for judging post-earnings direction. Stay tuned!