Option Volatility and Earnings Report For Aug 31 – Sept 4

This week, several key technology companies will be reporting their earnings. Companies like Broadcom (AVGO), Dell Technologies (DELL), Palo Alto Networks (PANW), and Snowflake (SNOW) are set to release their earnings reports. Before an earnings report, implied volatility tends to be high as market participants are uncertain about the outcome.

This high volatility often leads to increased demand for the company's options, which in turn raises the price of those options. Despite having impressive results, Nvidia's stock may be stuck in a range with limited opportunities. Micron Technology appears to be a contrarian opportunity, while Netflix puts could be worth shorting due to high one-month yields.

To estimate the expected range for these stocks, look at the at-the-money put and call options on the option chain for the first expiry date after the earnings date. This method provides a reliable estimate of the expected range. Option traders can use this expected range to structure trades, while risk-defined strategies are recommended when trading options over earnings to limit potential losses.