Delta Air Lines reports Q1 2026 earnings on April 8 before the market opens. Options traders have priced in an expected move of approximately 10.4% in either direction. That single number tells you more about how to approach this event than any analyst forecast.
- The expected move is the options market's consensus estimate of how far a stock will move after an earnings report.
- DAL options are pricing in roughly a 10.4% move (up or down) for the April 8 earnings event.
- IV crush happens immediately after earnings: implied volatility drops sharply once the uncertainty resolves.
- Understanding the expected move helps you size and structure trades, but it does not predict direction.
- All examples below are hypothetical and for educational purposes only.
What the Expected Move Actually Means
When traders say DAL has a 10.4% expected move, they mean the options market collectively believes there is roughly a 68% probability that the stock ends up within that range after earnings. This comes directly from the price of the at-the-money straddle.
The quick formula: add the at-the-money call and put prices for the first expiration after earnings. That sum is the market's implied one-standard-deviation move. If DAL is trading at $67 going into earnings and the April 11 ATM straddle is priced at $7.00, the implied move is roughly $7.00 divided by $67, or about 10.4%.
That means the 68% range is approximately $60 to $74. The stock is expected to land inside that range about two-thirds of the time. About one-third of the time, it moves more than 10.4% in one direction.
The expected move is not a prediction. It is a pricing statement. The options market is saying: to buy insurance against this event, the cost implies this range. Whether DAL actually moves 8%, 12%, or 2%, the market's job was to price the uncertainty, not predict the outcome.
Why Airlines Make Good Teaching Examples
Airlines report earnings in a macro-visible environment. Fuel costs, capacity, load factor, and yield data are widely discussed before the report. DAL's Q1 2026 consensus: EPS around $0.64 (up nearly 40% year-over-year), revenue near $14.8 billion.
High analyst attention and high options volume create a liquid options market, which makes the expected move more reliable. A thinly traded stock might have a technically calculable expected move, but the bid-ask spreads are wide enough that the number is less meaningful. DAL is liquid enough that the expected move is a serious market signal.
The earnings volatility ranking (EVR) is another useful metric. An EVR above 1.0 means the options market is pricing in a bigger-than-typical move given the stock's historical volatility. DAL's EVR heading into April 8 sits around 3.4, meaning options are priced rich relative to how the stock typically moves outside of earnings. This is a sign of elevated implied volatility (IV) before the event, and IV crush potential afterward.
IV Crush: What Happens After the Report
Before earnings, implied volatility rises as uncertainty builds. After the report drops, the uncertainty resolves and IV collapses quickly regardless of which direction the stock moves. This is IV crush.
The effect can be significant. A DAL option with 10.4% implied move might see its IV drop from 80% or higher pre-earnings to below 30% within an hour of the open on April 8. An option that was worth $2.50 on April 7 might be worth $0.80 on April 8 morning, even if the stock moved in the direction the trader predicted.
This is why simply buying options before earnings is less profitable than it appears. You need the stock to move more than the expected move to profit from a long straddle or strangle. If DAL moves 7%, a long straddle that priced in 10.4% loses money, even though 7% is a significant move by any normal measure.
Hypothetical Trade Structures Around the Expected Move
All examples below are hypothetical and illustrative only. They are not trade recommendations. Options trading involves risk, including the potential loss of the full premium paid.
Short Straddle (Hypothetical)
A trader who believes the stock will move less than the expected move might sell the ATM straddle. In this hypothetical, assume DAL is at $67 on April 7, and the April 11 $67 call and $67 put are priced at $3.50 each, for a total straddle premium of $7.00.
If the stock stays within $60 to $74 at expiration, the short straddle profits. The maximum profit is the $7.00 premium collected (if the stock closes exactly at $67). The breakeven points are $60 and $74. Below $60 or above $74, the position loses.
The risk: if DAL moves 15% on the report, the loss is large. Undefined-risk positions require careful position sizing and a plan to close or manage before expiration.
Short Strangle (Hypothetical)
A short strangle moves the short strikes outside the expected move range. Instead of selling the $67/$67 straddle, a hypothetical trader might sell the $61 put and $73 call for a combined premium of $4.00.
The advantage: the stock can move up to 10.4% in either direction and the trade still profits. The disadvantage: collecting only $4.00 means the maximum profit is lower, and the position still has undefined risk beyond the strikes.
Iron Condor (Hypothetical)
For traders who want to define their risk, an iron condor pairs the short strangle with long options further out-of-the-money. A hypothetical structure might be: sell the $58/$61 put spread and the $73/$76 call spread. This caps the maximum loss at $3.00 per spread minus the premium collected, regardless of how far DAL moves.
The tradeoff: defined risk comes with a cap on profit and higher buying power efficiency. For a retail account without portfolio margin, iron condors are the standard way to structure earnings trades within approval levels at most brokers.
Closing the Trade: Before or After Earnings?
Most premium sellers avoid holding short options through earnings because the move can exceed the expected range on either side. A more common approach is to open the position 3-5 days before earnings while IV is building, then close before the report drops and IV crush has run its course.
This is the opposite of what directional traders typically do. A directional trader might open a long call or put close to the event and hope for a big move in one direction. A premium seller typically wants to capture the elevated IV premium before the event, not gamble on direction after it.
If you hold through earnings, have a defined exit plan. Know your max loss, know at what price you'll cut the position, and do not expect IV crush to save an out-of-the-money short option if the stock moves against you sharply.
How This Works at Your Broker
Most options-capable brokers display the expected move on the options chain before earnings. tastytrade shows the expected move cone on the underlying price chart and displays the ATM straddle price directly, making it easy to calculate on the fly. Interactive Brokers shows implied volatility data and probability curves in OptionTrader, which is useful for visualizing strike probabilities around the expected move range.
For earnings trades specifically, check approval levels before placing. Short strangles and short straddles require naked options approval (typically Level 3 or Level 4 depending on the broker). Iron condors are defined-risk and available at most standard spread approval levels.
Bottom Line
The expected move is one of the most useful numbers in options trading during earnings season. It is the market's consensus estimate of the likely move range, derived from options pricing, not from analyst forecasts. For DAL on April 8, that range is approximately 10.4%. Understanding how to read, calculate, and structure around the expected move is a core skill for any active options trader.
Frequently Asked Questions
- How is the expected move calculated?
- Add the price of the at-the-money call and put for the first expiration after earnings. Divide by the current stock price. The result is the approximate one-standard-deviation expected move expressed as a percentage.
- Does the expected move predict which direction the stock will go?
- No. The expected move is a range estimate based on options pricing, not a directional prediction. The stock has roughly equal probability of landing anywhere within the range, and about a one-in-three chance of exceeding it in either direction.
- What is IV crush and why does it happen?
- IV crush is the rapid drop in implied volatility that occurs after an earnings report is released. Before the report, uncertainty drives IV up. Once the news is out, the uncertainty resolves and IV drops quickly, which reduces option prices even if the stock moves significantly.
- Why might a long straddle lose money even if the stock moves a lot?
- If the stock moves less than the implied expected move, the position loses because you paid for a larger move than you got. IV crush also reduces the value of both legs immediately after the report, working against long options holders.
- Is selling options before earnings always profitable?
- No. If the stock moves beyond the expected move range (the ~32% of the time the move exceeds one standard deviation), short premium positions can lose significantly. Position sizing and defined-risk structures like iron condors help manage this risk.