Gold Silver Reports – Keep a bias toward long volatility on U.S. stocks before their earnings reports, JPMorgan Chase & Co says.
The options market is expecting earnings-related volatility to be roughly in line with the historical average, but a larger-than-normal risypremium is justified by “the important and idiosyncratic tax reform data point accompanying companies’ earnings reports,” JPMorgan strategists Shawn Quigg, Marko Kolanovic and Bram Kaplan wrote in a report.
The Cboe Volatility Index, or VIX, just completed twoweeks of gains along with the S&P 500, a phenomenon that hadn’t been seen over a similar stretch since August 2016.
The tax cuts have been a major focus in both U.S. earnings reports and forecasts so far in thecurrent quarterly earnings season, including from big banks as well as companies like UnitedHealth Group Inc. and Johnson & Johnson. About 12 percent of the market capitalization of Russell 1000 companies reports earnings Wednesday through Friday, JPMorgan estimates.
The JPMorgan strategists “would advise a general bias toward being long volatility on single names into reporting,” they said. – Neal Bhai Reports