DE Post Earnings Stock and Options Behavior
DE Historical Implied vs Actual Earnings Moves Chart
DE‘s recent earnings report delivered a double whammy: a 5.4% stock drop exceeding the pre-earnings straddle’s 4.5% expectation and a subsequent 21% plummet in implied volatility (IV). But is this IV “crush” overdone, and could a rebound be on the horizon?
Historical DE IV Earnings Crush Stats
DE Pre-Earnings IV
Source: Marketchameleon
Lower Than Usual
Before the earnings report, DE’s IV stood at 28.9, below its historical average of 33.8. This lower-than-average IV potentially set the stage for the options straddle to underestimate the actual stock movement.
DE Post-Earnings IV
Source: Marketchameleon
Drops By More Than Usual
Following the earnings announcement, DE’s IV experienced a sharp decline to 22.9, marking a 21% decrease. This drop is notably steeper than the historical average IV reduction of 18% post-earnings, suggesting an overextension in the IV crush.
Historical IV Comparison
Low End Of The Range
The post-earnings IV of 22.9 not only falls below the historical post-earnings average of 28 but also remains subdued compared to the 5-day post-earnings average IV of 27.6%. Analyzing the IV range over the last 12 quarters—high of 41.9 and low of 19.7—shows that while the current IV is on the lower spectrum, it has seen lower levels in previous quarters.
Conclusion
The post-earnings IV crush in DE appears to be more pronounced than usual, with the current IV trading at the lower end of its historical post-earnings spectrum. While it’s uncertain whether IV will see a rebound, the gap to return to the historical average is wider than the potential drop to the historical low range.This scenario leaves room for questioning on whether the IV crush was overdone and if a correction towards the historical mean could be in the cards.
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Originally Posted February 15, 2024 – DE IV Crushed -21% After Earnings: Is There Further Downside?
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