By Saqib Iqbal Ahmed<\/p>\n

NEW YORK, Aug 7 (Reuters) – An options strategy that bets on stocks logging larger-than-expected moves on corporate results has been a surprising winner this earnings season, data from options analytics service ORATS showed.<\/p>\n

Buying options straddles on U.S.companies reporting results over the last three weeks – a strategy that combines a put and a call option – is paying off this quarter, \u2b50\u2b50\u2b50All-in-one web analytics\u2b50\u2b50\u2b50<\/a> ORATS data showed.<\/p>\n

Calls convey the right to buy shares at a fixed price in the future and puts offer the right to sell shares.Owning both these contracts is a way for traders to profit from larger-than-expected post-earnings stock swings.<\/p>\n

For the last three weeks, options straddles on U.S. companies reporting results fetched an average return of 8%, ORATS data showed.That compares with an average return of -2% over the last 12 quarters.<\/p>\n

\u00abIt is not usual for straddles to pay off,\u00bb ORATS founder Matt Amberson said, noting that the strategy has tended to be a slight loser in recent quarters.<\/p>\n

Generally poor expectations for stock gyrations at the start of earnings season – the Cboe Volatility Index hovered near a more than 3-year low as earnings kicked<\/a> off – may have helped set up the trade favorably by making it cheaper for investors to bet on heightened stock moves.<\/p>\n

With volatility expectations low, stocks handily<\/a> topped options-implied moves as earnings season progressed.<\/p>\n

That, however, may be changing, Amberson said.<\/p>\n

As volatility has picked up, these bets have become more expensive, making it harder for the strategy to post a win.<\/p>\n

Of the 422 companies in the S&P 500 that have reported earnings as of Aug.4, 79.1% beat analysts’ expectations, the highest rate since the third quarter of 2021, I\/B\/E\/S data from Refinitiv showed. (Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Richard Chang)<\/p>\n<\/div>\n

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