Earnings Calendar: Trading Earnings Season

Four times a year, publicly traded companies release their quarterly results — events that often trigger price moves disproportionate to routine macro releases, and that follow a very specific market mechanic, particularly in the options market.

In this guide, we explain how earnings season works, what IV crush is, and how to interpret the implied move the market prices in ahead of a release.

Implied Move: What the Market Expects

Ahead of every earnings release, the price of options on the underlying stock prices in an expectation of the size of the next-day price move — what's known as the implied move. This figure, calculated from the price of options expiring closest to the release date, gives a direct estimate of what the options market is collectively "betting" on in terms of reaction magnitude, in either direction.

A large implied move reflects high anticipated uncertainty — often the case for heavily followed companies, names with a history of volatile results, or those operating in fast-changing sectors. A more modest implied move reflects greater market confidence in the predictability of the upcoming results.

IV Crush: The Phenomenon You Need to Understand

An option's implied volatility prices in the uncertainty tied to the upcoming earnings event. Once results are released — the uncertainty resolved, whether the reaction is positive or negative — that volatility premium collapses sharply. This is what's known as IV crush.

This phenomenon carries a direct implication often misunderstood by beginners: even if the stock moves in the anticipated direction after the release, an option bought right before earnings can still lose value, with the drop in implied volatility offsetting, or even exceeding, the gain from the favorable price move. Conversely, options sellers (premium-selling strategies) structurally benefit from this mechanism, capturing the volatility premium that collapses after the release.

Results vs. Implied Move: The Real Reading

Beyond the simple direction of the post-earnings price move, experienced traders compare the actual move's magnitude to the implied move priced in by the market ahead of the release. A price move meaningfully larger than the implied move reflects a significant surprise relative to expectations; a smaller move, even in the right direction, can disappoint options positions built around an expectation of high volatility. This is exactly the dynamic that explains why a stock can sometimes drop sharply despite seemingly solid results — the market had simply priced in an even bigger positive surprise.

A Concrete Example of Reading Earnings

Imagine a company whose pre-earnings implied move sits at 8%, reflecting high anticipated uncertainty. Reported results beat expectations, and the stock opens up 4% the next day — a positive reaction, but notably smaller than the anticipated implied move. This context generally comes with a sharp drop in implied volatility (IV crush), which can hurt long options positions even when built in the right direction, while volatility-selling positions benefit fully.

Take Your Market Reading Further

Reading earnings pairs usefully with other structural signals. Check out our guide to GEX/DEX to understand how the gamma regime shifts around releases, or explore the Yuka Score, our composite market-context indicator.

Frequently Asked Questions

Should you avoid holding stocks through earnings?

It entirely depends on your risk tolerance and investment horizon. For a long-term investor convinced of a company's fundamentals, short-term volatility around earnings generally matters little. For an active trader, the question deserves a specific look at gap-risk exposure.

How is the implied move actually calculated?

A common method looks at the price of a straddle (simultaneously buying a call and a put at the same strike) for the expiration closest to the release — that price, relative to the stock's current price, gives a direct estimate of the market's anticipated move.

Disclaimer: This content is provided for informational and educational purposes only. It does not constitute investment advice. Financial markets, particularly options trading, carry a high risk of capital loss. Yuka Finance does not guarantee the accuracy, completeness, or timeliness of the data presented. Do your own research and consult a licensed financial advisor before making any investment decision.