Earnings announcements

Definition

Earnings are the equity market’s scheduled information events: quarterly results plus guidance, at a known date, with the options market pricing the expected gap in advance (opt-expected-move). The playbook has three phases — the run-up (IV builds, positioning accumulates), the print (the gap, the guidance, the call), and the aftermath (IV crush and the documented drift) — each with distinct mechanics and distinct theses.

How it works / structure

• Pre-event structure: event-dated IV elevates above surrounding expirations (opt-term-structure event bumps); the straddle price states the market’s expected move — every earnings thesis is measured against it, not against zero.
• The print: results vs consensus (fa-guidance-estimates — the comparison set), guidance vs consensus (frequently the larger mover), and the reaction’s TONE (a rally on bad news is positioning information — qualitative-analysis reaction-vs-news reading).
• The aftermath: IV crush (event premium evaporates at the print — long option positions need the move to beat the crush, strategy-straddle economics) and post-earnings- announcement drift (PEAD): Bernard-Thomas (1989) documented that extreme earnings surprises drift in the surprise’s direction for weeks — underreaction, among the most persistent documented anomalies, though attenuated in large caps in recent samples.
• Engine-executable playbook parameters: hold-through vs flat-by rules per strategy (mgmt-time-based-exit event boundary), expected-move multiple for strikes, post-event entry windows (drift theses), and the mandatory event flag on any position spanning the date.

When it applies

Every single-name position spans earnings or does not — the calendar check is mandatory; volatility structures around the event (long-vol needs the move > priced move; short-vol needs the reverse — both stated against expected_move_pct); drift theses post-print; fundamental theses graded at the print (lens-fundamental falsifiers often ARE earnings lines).

Risk profile & failure modes

• The priced-move trap: “big move coming” is not a thesis — the market priced one; only a DIFFERENT move than priced is tradeable information.
• Gap-through-stops: earnings gaps skip every intraday control (mgmt-stop-loss gap caveat at maximum) — event spans are sizing decisions, not stop decisions.
• IV crush on the right direction: long options can lose on a correct directional call when the move underperforms the crush — the decomposition belongs in the thesis.
• Drift decay: PEAD is weaker in liquid large caps recently — surprise-drift theses need the current-sample caveat.

Evidence & limits

Disclosure timing is SEC-regulated; expected-move pricing is options arithmetic. Bernard-Thomas (1989) and a large successor literature document PEAD; attenuation in recent large-cap samples is also documented. IV crush is structural (the event premium’s definition). Specific “earnings season playbooks” sold as reliable are folklore.

Falsifiable-thesis examples

Illustrations only, not signals:

• “X will move more than 1.25× its priced expected move at this print” — falsified by the realized gap.
• “Names in the top surprise decile this season will outperform their sector over the following 30 sessions (PEAD thesis)” — falsified by the cohort’s returns.

Cross-references

• The frame: lens-event-catalyst, opt-expected-move, opt-term-structure
• Structures: strategy-straddle, strategy-strangle, strategy-calendar-spread (event-date short leg)
• The comparison set: fa-guidance-estimates, sent-analyst-revisions
• Reaction reading: qualitative-analysis