We Don’t Need No Stinkin’ Earnings Bid Up

So a funny thing happened as we watched the market implode and roar back. All of a sudden it’s earnings season.

What’s a tad unique this time around is that you really need some incredible skills to differentiate the standard earnings bid up in options from the overall bid up in options we see everywhere.

Take these two charts. Up above is GOOG, which reports after the close tomorrow. Down below is RIMM, which came out a couple weeks ago. If the recent patterns look identical, it’s because they essentially are identical. Each hit a 52 week high in the spike on Friday, and each dropped about 20% off that high. And each sits roughly double the old “normal” levels.

You could assign those same attributes to most stocks, as well as the market itself.

So bizarre as this may sound, you are actually getting a good deal on buying GOOG gamma ahead of earnings, although more so in Novs than Octs. On a relative basis in that the options would likely trade here anyway in this environment. Of course even with the drop, GOOG options are very high, as before this move, 50 was the 52 week high in 30 day normalized volatility.