GOLDMAN: The Options Market Is Pricing In Big Moves When These 14 Stocks Announce Earnings

Stocks tend to move on earnings announcements, as the occasion provides investors an opportunity that only comes around four times a year to update the denominator in popular valuation metrics (like the price-to-earnings ratio).

Goldman Sachs equity derivatives strategists John Marshall and Katherine Fogerty took to the options market to see which stocks are expected to move the most on earnings announcements over the coming week.

In a note to clients, Marshall and Fogerty write:

We identify 14 stocks where the options market expects high earnings-day moves over the next week. The options markets expects a +/- 13.1% earnings-day move for the average stock in this list, almost 3X the +/- 4.8% implied move for the average S&P 500 stock this earnings season. While these implied moves are high on an absolute basis, they are also high after controlling for historical earning-day moves. We believe incremental research time spent on these stocks could likely yield unusually high alpha potential as big implied moves typically foreshadow big moves around earnings-day.

Stock specific stories: RSH, CBST, ZNGA. While a low beta suggests low systematic risk, their unusually high absolute implied move, as well as relative to average realised move, suggests stock specific risks on earnings day this quarter.

Low realised volatility: EQIX, LXK, AKAM, COH. Recent average daily moves realised by these stocks have been low; however, option prices point to volatile earnings day moves.

The table below shows the moves options markets are pricing in for each stock.

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