Reading Positioning Around Earnings
Earnings week positioning looks dramatic and means much less than it appears, because the open interest reflects event hedging rather than directional conviction.
Why do gamma levels break down around earnings?
Earnings open interest is dominated by event hedges and volatility positions rather than by directional bets. Dealer hedging around those contracts follows volatility rather than price, so the usual relationship between a heavy strike and a price reaction weakens considerably.
What actually matters in earnings positioning?
The implied move priced by the options market matters more than any individual strike. Comparing the implied move against the stock's recent realised earnings moves reveals whether the options market is pricing the event expensively or cheaply relative to history.
How does the Obsidian desk handle earnings sessions?
The Obsidian desk avoids holding positioning based trades through an earnings release, because the release resets the entire chain. Positioning levels become tradable again on the session after earnings, once the event hedges have been closed and the chain has reset.