The escalating earnings season will see reports from Tesla (NASDAQ:TSLA), Johnson & Johnson (NYSE:JNJ), Bank of America, Netflix (NASDAQ:NFLX), Morgan Stanley, American Express (NYSE:AXP), Lockheed Martin (NYSE:LMT), and Goldman Sachs today. The pre-report period has been characterized by high implied volatility and inflated options prices, with post-announcement normalization expected to reduce this volatility.
The expected stock ranges have been calculated from at-the-money put and call options prices, assisting in strategy formulation for options traders. Bearish traders are selling bear call spreads outside the expected range, while bullish traders are selling bull put spreads or choosing naked puts based on risk tolerance. Neutral traders are opting for iron condors. Small position sizes in risk-defined strategies are recommended for trading over earnings. High implied volatility stocks can be identified using Barchart's stock screener applying specific filters.
The upcoming week will also include reports from Bank of America, Goldman Sachs, Morgan Stanley as well as Tesla and Netflix. This will provide insights into how financial services are dealing with high interest rates. Economic data including the September retail sales report and housing sector information will also be revealed.
Stocks started the week positively, with the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite increasing by 0.6%, 0.5%, and 0.3% respectively. Investors are keeping an eye on the US-Israel-Hamas conflict and preparing for corporate earnings.
Concerns about a regional conflict in the Middle East that could send oil prices soaring above $100 a barrel and possibly cause a global recession persist. JPMorgan's CEO Jamie Dimon has issued a warning about these dangerous times globally. Crude oil futures traded around $87 and $91 a barrel after climbing almost 6% on Friday.
In other market news, Rite Aid (NYSE:RAD) Corporation filed for bankruptcy, Pfizer Inc. (NYSE:PFE) reduced its COVID vaccine sales forecast, Lululemon (NASDAQ:LULU) is joining the S&P 500 index, and there are concerns about Manchester United's potential buyout. Dow futures also rose due to Middle East tensions. Gold prices fell, and the 10-year Treasury yield rose to 4.69%, recovering some of its losses from last week.
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