40% of the time, options prices move in the opposite direction of the earnings surprise.
For those who are skeptical, this is not magic. The reasons for it are all the reasons you might expect: the biggest investors may not agree with the market consensus, the analyst consensus doesn't weight analysts by credibility so the "credible" analysts may not match consensus and so on.
Workday beated estimates by over 50%, yet shares fell.
I can give a lot more examples...
Lots of investors also sell when earnings beat estimates because they think they'll be selling high, etc. Point is there are tons of factors and it is way too simplistic to say beating earnings = price increase on that day.
There are two estimates you need to consider. The official estimate and the 'secret' estimate that investors really think you should beat. Although most people focus on the first one, it's only the second one that really counts.
Point is there are tons of factors and it is way too simplistic to say beating earnings = price increase on that day.
This really depends on how accurate analyst estimates have been in the recent past. Consistently beating estimates will produce less gains over time. Similarly, consistently missing earnings will eventually cause less price damage over the mid run (of course it will probably produce bankruptcy in the long run). Confounding this picture in this case is that the market is trying to price a bunch of spinoffs which have been announced or rumored.
40% of the time, options prices move in the opposite direction of the earnings surprise.
For those who are skeptical, this is not magic. The reasons for it are all the reasons you might expect: the biggest investors may not agree with the market consensus, the analyst consensus doesn't weight analysts by credibility so the "credible" analysts may not match consensus and so on.