VXAZN Index Dropped 37.5% on Day After Jan. Earnings Announcement

Amazon.com, Inc. (AMZN) is expected to report earnings on July 25th. The report will be for the fiscal quarter ending June 2013.

A key question for options investors is – what has happened and will happen to AMZN implied volatility on and around the earnings announcement dates?  A key metric for measuring expected 30-day volatility of AMZN since June 2010 is the CBOE Equity VIX® on Amazon (VXAZN). As shown in the table below, AMZN made earnings announcements earlier this year on Jan. 29 and April 25, and the VXAZN Index fell by 37.5% on Jan. 30, and fell by 27.2% on April 26.


 Weeks with earnings announcements often can see big changes in implied volatility.

If you believe that implied volatility will increase in the near future, some of the options strategies that you could explore include —

  • Long calls (Weeklys available)
  • Long Puts
  • Long Straddles or Strangles

If you believe that implied volatility will decrease in the near future (e.g., after an earnings announcement), some of the options strategies you could explore include —

  • Short calls or puts
  • Long Butterfly if confident on price range
  • Short Straddles or Strangles

Caution — While implied volatility increases before earnings announcements will often could help calls and puts to increase in value, those increases in value could be offset by factors such as large price moves in the underlying stock, and time decay.

To learn more about options strategies, please visit http://www.cboe.com/Strategies.  To learn more about the VXAZN Index and more than 20 other volatility indexes, please visit www.cboe.com/volatility