Everyone Panics During Earnings Season. 13 Years of VIX Data Says Don't Bother.

Key Concepts

• VIX (CBOE Volatility Index): Often referred to as the "fear index," it measures the market's expectation of 30-day volatility based on S&P 500 index options.
• Implied Volatility (IV): The market's forecast of a likely movement in a security's price.
• Earnings Season: A period (typically 6 weeks) when public companies release their quarterly financial results.
• Binary Event: A specific occurrence (like an earnings announcement) that creates a sharp, short-term shift in a stock's price or volatility.
• Volatility Expansion: The tendency for option premiums to increase in price due to heightened uncertainty surrounding an event.

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1. Main Topics and Findings

The primary focus of the discussion is whether the VIX exhibits "inflated" levels during earnings seasons compared to non-earnings periods. The presenters analyzed data from 2013 to 2026 (covering 50 earnings seasons) to determine if the broader market index reacts significantly to these events.

Key Findings:

• Statistical Indifference: The data suggests that the VIX is largely insensitive to earnings seasons.
• New Highs: The VIX made a new high during an earnings season 26 times, compared to 24 times during non-earnings seasons—a statistically insignificant difference.
• Range and Median: Both the average and median VIX levels were nearly identical between the two periods (Average: ~19; Median: ~16–17).
• Conclusion: The presenters conclude that the broader market's volatility index is not significantly impacted by earnings, labeling the phenomenon "much ado about nothing" regarding the index level itself.

2. Individual Stocks vs. Market Index

A critical distinction is made between the market index (VIX) and individual stocks:

• Individual Stocks: These definitely experience volatility expansion during earnings. Options on individual stocks typically retain higher premiums due to the binary nature of the event.
• Market Index: While individual stocks move, the aggregate effect on the S&P 500 (represented by the VIX) is negligible. The presenters note that traders should not use the VIX as a proxy for individual stock earnings volatility.

3. Methodologies and Frameworks

• Comparative Analysis: The team compared three specific metrics across 13 years of data: VIX highs, VIX high-to-low ranges, and average/median VIX values.
• Trading Strategy: The presenters discuss their personal approaches:
  • Tony: Prefers "post-earnings" trades, avoiding the uncertainty of the announcement itself.
  • Nick: Trades through earnings, acknowledging that while volatility expands, the stock usually stays within the "expected move" about 68% of the time.

4. Market Update (Current Context)

The video concludes with a brief snapshot of the market state:

• S&P 500: Hovering just under all-time highs, down 21 handles.
• Nasdaq & Russell: Identified as the weakest performers on a percentage basis.
• Bonds: Trading at 112.17 (front month); the presenters note the upcoming roll to the June 26th contract.
• Commodities/Crypto: Oil is up significantly (+$3), while Gold and Silver are down, with Silver showing double the downward volatility of Gold. Bitcoin is noted as being at a daily low.

5. Notable Quotes

• "There’s almost no correlation between the index IV and the individual stocks' IV during earnings season."
• "Volatility for earnings is a non-event, ladies and gentlemen, and that’s really all you need to know."
• "It’s much ado about nothing... it doesn’t affect the market in its whole."

6. Synthesis and Takeaways

The core takeaway is that while earnings season is a high-volatility event for individual equities, it is a non-event for the broader market index (VIX). Traders are advised to distinguish between the volatility expansion seen in single-stock options—which can be traded directionally or via premium selling—and the VIX, which does not provide a reliable signal for broader market volatility during these periods. The presenters emphasize that for the overall market, the hype surrounding earnings season volatility is largely unsupported by historical data.