The Week Ahead

After last week’s nearly 3% decline in the SPX, equities are at a critical juncture. A rebound this week would maintain the sideways, though volatile, trend we’ve seen since early November. However, further declines could trigger a spike in implied volatility and shake investor confidence.

The week ahead features key inflation data on Tuesday and Wednesday, alongside the official kickoff of earnings season, with major banks reporting on Wednesday and Thursday. The week is punctuated with monthly options expiration on Friday’s close.

On the RiskReversal Media front, keep an eye out for special guest Dan Niles on Wednesday as he sits down with Dan Nathan to discuss earnings season, with a particular focus on the Fateful Eight (Formerly the Mag 7 + AVGO, which recently joined the trillion dollar club)

Below is a snapshot of expected moves for the week based on options pricing, along with notable economic releases and earnings (including expected moves):

Expected Moves for the Week:

• SPY: 1.7%

• QQQ: 2.3%

• IWM: 2.6%

• USO: 3.2%

• TLT: 1.5%

Earnings and Economic News

• Monday

  • Earnings after hours: KBH 7.2%

• Tuesday

  • 8:30am: PPI

  • 3:05pm: Fed Williams Speech

• Wednesday

  • Earnings Pre-market: JPM 3.5%, C 4.1%, WFC 4.9%, BLK 3.3%

  • 8:30am: CPI

• Thursday

  • Earnings Pre-market: TSM 6.1%, UNH 5.9%, GS 4.4%, MS 4.4%, USB 4.7%, PNC 4.0%

  • 8:30am: Retail Sales

  • Earnings after hours: JBH 4.9%

• Friday

  • Earnings Pre-market: SLB 4.6%, FAST 5.0%

  • Monthly options expiration

Expected moves provide a useful gauge of how the market prices risk versus actual market behavior. This week’s SPX expected move is 1.7%—larger than in a low-volatility environment but not extreme. For context, in calm periods with the VIX in the low teens, weekly expected SPX moves are around 1.2%. In more chaotic times with the VIX in the high 20s, expected moves can approach 3%. Currently, we’re in the middle, but actual recent market volatility has exceeded expectations, as evidenced by last week’s nearly 3% SPX drop.

This dynamic also applies to individual stocks, particularly during earnings season. While most stocks stay within their expected moves, about 30% or so exceed them, often significantly. The frequency and magnitude of such moves can signal investor sentiment—whether nervous or euphoric. With major banks kicking off earnings season, watch how actual moves compare to expectations.

Lastly, consider historical patterns. In 2024, notable market pullbacks in April and July occurred shortly after bank earnings and quarterly options expirations. While this week features a regular monthly expiration, recent historic-sized expirations at the end of 2024 may explain some of the recent market volatility.

Subscribe to the RiskReversal YouTube Channel and drop a comment/like to show your support

Want to check out past episodes? Search for “On The Tape,” “MRKT Call,” or “Okay, Computer.” wherever you listen to podcasts

We want to hear your feedback! Reply to this email with any comments or questions