Market Measures

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Earnings: Past vs Future

Market Measures

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Generally, we look to sell stocks with high implied volatility rank. Around earnings season, however, almost all stocks have High IVR, so how do we pick and choose what to trade?

It turns out that since earnings are a binary event with a large expected move, IVR may not be as helpful compared to when there is no binary event. This is due to the fact that earnings give very little edge in neutral strategies.

By looking at historical earnings movements and comparing them to current expected moves, we can get a better gauge of what to sell, however, this is difficult to do in practice.

Earnings still present opportunities for us to stay engaged in the markets, however, the edge in these binary events is generally very small.

Tune in as Tom and Tony aim to interpret this information and put it to use this earnings season.

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