Method

How the line works

The line is the move the options market expects from an earnings report. Here's how it's calculated and how it's scored.

1. Start with the straddle

An at-the-money call plus an at-the-money put costs roughly what traders expect the stock to move, in either direction, by expiration. Divide that price by the stock price and you have the raw straddle move. Prices are bid/ask midpoints, and markets too wide to trust don't get a line.

2. Take out the ordinary days

The nearest expiry after a report also covers normal trading days, which inflates the raw number. So we price two expiries that both include the report. The extra cost of the later one shows what an ordinary day is worth. Subtract those days and what's left is the move priced for the report alone.

report² = front² − (back² − front²) × front days ÷ (back days − front days)

Front and back are the two straddles as a share of the stock price. Days are trading sessions to each expiry. When the two expiries don't separate cleanly and the front expiry is within a week, the line falls back to the raw straddle and the page says so. Further out, a report too small to separate from ordinary days gets no line until it's closer. Names without a weekly expiry within a week of the report don't get a line.

3. Lock it, then score it

Lines reprice every close and lock at the last close before the report. Before-the-open reports settle on that day's close. After-the-close reports settle on the next day's close. A stock that moves more than the line, close to close, broke it.

4. Compare with history

The usual move is the average close-to-close reaction, up or down, over the last eight reports. A line at 1.2× that or more is pricing a bigger move than usual. At 0.8× or less, it's pricing a smaller one.

Data

Option prices come from Cboe's delayed quotes, the calendar from Nasdaq, and price history from Yahoo Finance. Report dates and times can change. Nothing here is investment advice.