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A company's earnings release date significantly affects weekly or monthly option prices and implied volatility. For companies that typically release earnings on the cusp of monthly options expiration - either a few days before expiration or a few days after - it would appear the day that the earnings release date is announced may itself significantly affect monthly option prices. (AAPL is an example of such a company, sometimes releasing before monthly options expire, and sometimes releasing after monthly options expire.)

My questions are:

  1. Am I correct in this assertion, that the day a "cusp company" announces its earnings release date can significantly affect option prices either that day or in the coming week or two, particularly if the "market" has guessed wrong about when the earnings release date will be?

  2. What factors go into a company such as this (on the cusp) picking the day it will release earnings? Is it merely a function of work load, or are other factors involved? More specifically, how might one gauge whether a company such as this (e.g. AAPL) will release earnings before monthly expiration or after.

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I have opened a meta question on the appropriateness of this question, because it's typical of something I've been seeing for a little while and I don't know whether it belongs here: meta.money.stackexchange.com/questions/510/… –  fennec May 31 '12 at 23:44

1 Answer 1

I can't speak authoritatively to your broader question about stocks in general, but in several years tracking AAPL closely, I can tell you that there's little apparent pattern to when their earnings call will be, or when it will be announced.

What little I do know: - AAPL's calls tend to occur on a Tuesday more than any other day of the week - it's announced roughly a month in advance, but has been announced w/ less notice - it has a definite range of dates in which it occurs, typically somewhere in the 3rd week of the new quarter plus or minus a few days

More broadly for #1: Given the underlying nature of what an option is, then yes, the day an earnings call date is announced could certainly influence the IV/price of options - but only for options that expire inside the "grey area" (~2 weeks long) window in which the call could potentially occur. Options expiring outside that grey area should experience little to no price change in reaction to the announcement of the date - unless the date was itself surprising, e.g. an earlier date would increase the premium on earlier dated options, a later date would increase the premium for later-dated options.

As for #2: The exact date will probably always be a mystery, but the main factors are: - the historical pattern of earnings call dates (and announcements of those dates) which you can look up for any given company - when the company's quarter ends - potentially some influence in how long it takes the company to close out their books for the quarter (some types of businesses would be faster than others) - any special considerations for this particular quarter that affect reporting ability

And finally: - a surprise of an earnings call occurring (substantively) later than usual is rarely going to be a good sign for the underlying security, and the expectation of catastrophe - while cratering the underlying - may also cause a disproportionate rise in IVs/prices due to fear

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