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I’ve been digging through earnings data recently, and what I’m seeing is frustrating as hell. There’s a persistent pattern developing that’s making traditional premium selling strategies significantly riskier than they used to be. If you’re still approaching earnings the way you did last year, you’re setting yourself up to get steamrolled.
Earnings are consistently exceeding expected moves by 30% to 50%, and brokers are severely underpricing volatility. I’m seeing stocks move 14% to 15% in two days while pricing suggests moves half that size.
And it’s not just individual names — even indexes are breaking the math. When the VIX is near 17, the market can easily move more than 1%, yet we keep seeing expected SPX moves priced around 0.4%. The expected move was roughly 31 points on Thursday last week, and the market ripped more than 70.
We’re getting 2x moves while pricing acts like nothing is happening.
Let me show you exactly what I mean.
The Numbers Don’t Lie — And They’re Bad
Take Gilead Sciences (GILD). I calculated an average historical earnings move of about 8.16%, which at roughly $135 comes out to an $11.47 expected move. The broker priced in $6 for this week and $7 for next. That’s not even close — nearly 50% underpriced.
McKesson (MCK) was no better. The average move was around 9.16%, which should translate to about $67. The broker showed $50. These numbers aren’t just off — they’re broken.
This underpricing is happening across sectors, and it’s showing up in spreads too. Credits are so bad they’re almost insulting. You look at a 15 by 20 spread and it can’t even get you 30 cents.
Wide spreads with almost no credit. It’s the kind of thing that makes you stare at the screen and think, “Are you kidding me?” I saw setups offering 71 cents to make a dollar or $1.29 to make $2 — and I want nothing to do with them.
Add in options expiration flows pushing markets around, and it’s no wonder we’re seeing sharp, nonlinear moves leading into expiration. The structure itself is amplifying volatility while brokers keep pricing like we’re in a calm market.
What This Means for Your Trading Strategy
Earnings this year have been rewarding long options more than anything else, but let me be clear — that’s still a gamble. The only difference is that the odds have leaned slightly in favor of buyers because the implied volatility has been so mispriced.
With volatility consistently underpriced and real moves blowing past expectations, selling premium becomes a coin flip with a bad payout. So focus on defined-risk approaches that benefit from expansion or directional movement — small long options, simple debit spreads or tactical directional plays sized conservatively.
The market is telling you exactly what to do: respect the volatility, price it correctly in your own analysis and stop expecting brokers to do the math for you.
Don’t fight it.
I’ll see you in the markets.
Chris Pulver
Chris Pulver TradingÂ
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.Â
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