Insights 
VT 
Next week will see an uptick in the earnings season with releases from companies such as Tesla and Alphabet. The larger players like Amazon, Apple, and Meta are expected to announce their results the following week.
On Monday, Verizon and Domino’s Pizza will share their earnings before the market opens, with NXP Semiconductors scheduled for after market hours. Tuesday will see early reports from Lockheed Martin, Coca-Cola, Philip Morris, General Motors, D.R. Horton, and Northrop Grumman, while Texas Instruments, SAP, Intuitive Surgical, and Capital One will report later in the day.
Wednesday’s Announcements
Wednesday’s announcements include AT&T, GE Vernova, Freeport-McMoRan, and General Dynamics in the morning, followed by Tesla, Alphabet, ServiceNow, IBM, and Chipotle after the market closes. Thursday will begin with reports from American Airlines, Nokia, Dow, Southwest, and Honeywell, with Intel expected later.
The week concludes with Centene revealing their earnings before the market opens on Friday. This schedule offers a look into diverse sectors with companies from technology, automotive, health care, and consumer goods providing their financial updates.
We see the coming week’s earnings as a major catalyst for volatility in a market that has grown complacent. With the VIX, a key measure of market fear, recently trading under 13, well below its historical average, we believe options premiums are not adequately pricing in the potential for surprises. Traders should anticipate a sharp increase in implied volatility (IV) for individual stocks ahead of their reports.
Our Focus on Technology Reports
Our focus will be on the technology reports from Tesla and Alphabet on Wednesday, which will set the narrative for the rest of the tech season. Following TSLA’s Q2 delivery miss of 444,000 vehicles, the options market is pricing in a potential stock move of over 8% in either direction, and we will watch guidance on margins closely. For GOOGL, we will be looking for commentary on cloud growth and the costs associated with its AI integration, which will influence sentiment for the entire sector.
The semiconductor group, with NXP, Texas Instruments, and Intel reporting, will provide a critical read on the global economy. While the Semiconductor Industry Association reported a 15.8% year-over-year increase in global sales for May 2024, we remain cautious about the automotive and industrial segments, which have shown signs of softness. We believe using straddles is a viable way to trade the potential for a large price gap in these names, regardless of direction.
The performance of more traditional companies like General Motors, Coca-Cola, and Verizon will offer a counterpoint to the tech narrative. Given that June’s retail sales report showed a weaker-than-expected increase of just 0.1%, we will analyze these reports for signs of weakening consumer demand. Any downward revisions in guidance from these names could signal broader economic trouble.
A key strategy for derivatives traders will be navigating the inevitable post-earnings “IV crush.” High-beta names like Chipotle often see their implied volatility swell to extreme levels, with the market currently pricing a nearly 7% move for its report. We believe selling premium via strategies like iron condors could be profitable if the actual stock move is less dramatic than the pre-earnings hype suggests.
The reports from American Airlines and Southwest will offer a direct look into the health of the consumer. While recent TSA data shows robust travel demand, with checkpoints frequently clearing over 2.8 million travelers daily, we are focused on the impact of fuel costs on profitability. We view buying protective puts as a reasonable hedge against the possibility that strong revenue figures are undermined by commentary on rising expenses.
