Al Root

More than 100 U.S. companies worth a combined $20 trillion report earnings this week, including four Magnificent Seven names: Apple, Microsoft, Meta Platforms, and Tesla.

Investors can look at options markets to see what traders expect from stocks after earnings reports. The most aggressive investors can even take bets on what the market thinks about post-earnings volatility.

Having an options straddle position means simultaneously buying a call option, which gives the holder the right to buy shares of a company at a fixed price at a date in the future, and a put option, which gives the holder the right to sell shares at a date in the future. Straddles typically have the same strike price, the price to buy and sell, and the same expiration date.

Straddles are used to profit from price volatility rather than a stock moving up or down. Looking at straddles expiring near earnings and with a strike price near current levels can help investors gauge what the market thinks a stock will do after reporting earnings.

Take Tesla. A straddle with a strike price of $450 expiring at the end of the month costs about $29, or 6.5% of the current stock price. That is roughly how much traders expect Tesla stock to move up or down this week, which includes an earnings report on Wednesday evening.

Tesla, a notoriously volatile stock, has moved an average of about 6% up or down the week encapsulating the prior four quarterly reports, in line with history.

The question for investors is whether it is a good bet. It might not be. Tesla's "earnings moves have become much less volatile in recent quarters," wrote Susquehanna analyst Christopher Jacobson on Monday. "In fact, after a run where owning the earnings straddle proved positive in eight straight quarters, the straddle has been lower in three of the last four quarters, including last quarter when the realized move of +2.3% was the lowest since 2021."

So, Tesla stock is getting less volatile around earnings. One way to interpret that is investors are thinking less about current earnings and more about the future. Tesla generates most of its free cash flow from its car business, and most of its stock market value comes from yet-to-be-fully-developed AI opportunities, such as self-driving cars and robots.

Investors can remember that when judging the reaction to Tesla's earnings. It might come down to what CEO Elon Musk says about the robots and not how many EVs Tesla plans to sell this year.

Tesla stock was down 0.8% in premarket trading at $445.28, while the S&P 500 was off 0.2% and the Dow Jones Industrial Average futures were flat.

As for Apple, Meta, and Microsoft, traders expect shares to move roughly 4%, 7%, and 5%, respectively, this week. That's in line with historical volatility. Jacobson notes that Meta has been the best straddle to own heading into earnings lately, and Apple has been the worst.

Investors will have to wait to see if those patterns hold this week. At least, they have a way to judge how each stock did relative to expectations: Lower than the implied straddle move and things were OK, larger, and something surprised them.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 26, 2026 07:28 ET (12:28 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.