Earnings Trading Journal

Watching ARWR:
implied move =18.5%
impl. move relative to 4 quarter absolute ave hist. move = +8.5%
impl. move relative to 12 quarter abs. ave hist. move = +10.3%
max hist move in the last 12 quarters =17.7%
 
Adam777 said:
Watching ARWR:
implied move =18.5%
impl. move relative to 4 quarter absolute ave hist. move = +8.5%
impl. move relative to 12 quarter abs. ave hist. move = +10.3%
max hist move in the last 12 quarters =17.7%
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Hey adam!
where are you getting your implied move number? I am getting a 9% move?
Screen Shot 2019-11-22 at 2.22.20 AM.png


Without factoring in the market term structure and post event term strucutre here is a simple way to calculate the implied move.

Dec20 is 81% Ivol
Jan17 is 74% Ivol
Days to expiration Dec = 28
Days to expiration Jan = 56 * Note I usually use bizdays for everything but this is quick and dirty so we will use calendar days

NonEvent Vol = sqrt((.74^2 * 56 - .81^2 * 28)/(56 - 28)) = 66%
Event Vol = sqrt(.81^2*28 - .66^2*(28-1)) = 250%
Expected Move = sqrt(1/365)*250%*sqrt(2/pi) = ~10%

If the implied move was in-fact 18.5% I would be skeptical since it is a pharmaceutical company. Maybe a major drug release??
 
For those thinking of selling vol on ARWR, be weary! A single analyst upgrade today moved the stock 17%! This shows you the current regime ARWR is in. We could expect an uprgrade/downgrade after earnings tomorrow. I don't think a 9% implied move is high enough.
 
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