VEGA FIELD GUIDE · 12 · VOLATILITY
Earnings and event volatility
Earnings put a bright light on one overnight return. The front of the volatility curve often rises because a near-term option owns that announcement while a later option spreads the same event across more calendar days.
An earnings date contributes discrete event variance to every option that spans the announcement.
ATM straddle premium provides a practical market-implied move estimate with known simplifications.
Earnings-adjusted IV removes an estimated event component in variance space.
One event, several expirations
Before-market-open earnings usually affect the return from the prior close into that morning’s session. After-market-close earnings usually affect the next session. Accurate timing determines which option expiration owns the event and which close-to-close return measures the reaction.
Every expiration after the announcement includes the same discrete event, then adds ordinary variance for the remaining days. The event’s annualized impact is largest in the shortest spanning option because the variance is divided across fewer calendar days.
Read the implied move
A common estimate divides the at-the-money straddle premium by the stock price. It translates option dollars into a symmetric percentage move. Vega uses the selected expiration’s call and put marks and shows the quote-quality context beside the result.
The estimate is a market price with simplifying assumptions. Time value after the event, rates, dividends, skew, bid-ask spread, and the chosen strike all influence it. Historical earnings reactions provide a useful companion distribution once their dates and timing are aligned point in time.
Implied move percent = (ATM call premium + ATM put premium) / underlying priceRemove event variance carefully
An earnings-adjusted curve estimates the background volatility left after subtracting positive event variance from each option that spans the announcement. The subtraction happens in total-variance space. The result helps compare an event name with peers and with its own ordinary regime.
The adjustment depends on a known event date, timing, and a defensible event-move estimate. Missing point-in-time event data should leave the adjusted metric unavailable. A future calendar snapshot cannot safely fill an earlier historical panel.
Adjusted IV = sqrt[max(IV^2 - event_move^2 / T, 0)]Historical research should use the earnings date known on that market date. Revisions belong to later snapshots.
Worked example: recover the background regime
A $100 stock has a 30-day option with IV of 38.3%. The announcement is estimated to contribute a 7.5% discrete move. With T = 30 / 365, adjusted variance is 0.383² - 0.075² / (30 / 365), which is about 0.0784. The square root gives earnings-adjusted IV near 28.0%.
The same result works in reverse. A 28% background regime plus a 7.5% event move produces about 38.3% annualized IV for a 30-day option. The gap between raw and adjusted IV shows how much the calendar event affects the headline level.
| Component | Value | Role |
|---|---|---|
| Raw 30-day IV | 38.3% | Includes the event |
| Estimated event move | 7.5% | Discrete variance |
| Adjusted IV | 28.0% | Background regime estimate |
Build an event research checklist
- Use Pulse to rank upcoming events by days to announcement and implied move.
- Confirm the earnings date, BMO or AMC timing, and the exact expirations that span it.
- Compare raw IV, earnings-adjusted IV, term shape, and the history of realized earnings reactions.
- Inspect the chain for straddle price, skew, quote width, volume, and open interest.
- Model long and short structures in the calculator with explicit maximum risk and post-event IV scenarios.
- Replay prior entries with point-in-time chains and state every date, DTE, strike, mark, fee, and exit assumption.
Find the next event-volatility setups
Rank upcoming announcements, compare implied move with recent movement, and open a symbol or calculator position.