Every earnings season brings about significant price action for the stock market. We will take a look at the options markets and implied volatility to gauge some stocks that are expected to go through heightened volatility in the upcoming period.
The implied volatility of Uber’s shares, currently at 36.45%, is well above their historical average of 28.7%.
Uber’s earnings have started beating estimates in the second half of 2020 and reported an outstanding increase in profit in the last quarter. The large increase in open interest on call options is indicating traders are expecting more.
Uber usually experiences extreme volatility after each earnings report. The earnings report for Q3 2021 was released on 9 November.
With the growing number of net call positions in open interest, there will be extreme pressure on the share price in the case of a negative surprise in earnings.
The share price has been on a strong uptrend since the start of the pandemic, but there have been some strong corrections. The most notable is the one triggered by 2020’s fourth-quarter results.
Uber had reported an expected loss back then, but shares started a three-month correction that was only reversed after the following quarter’s earnings release in early May.