MW These 7 stocks pack explosive 'sawtooth' earnings volatility next week
By Lawrence G. McMillan
The S&P 500 is flashing a green light to investors
The S&P 500 Index SPX is roaring to all-time highs and the general market rally continues to widen. Record highs were registered this week by the Dow Jones Industrial Average DJIA, Nasdaq 100 NDX and the Russell 2000 RUT. First support for SPX continues to be 7,330, with various support levels below that down to 7,000.
The MVB sell signal is still in place, since SPX has not closed above its +4<SIGMA> "modified Bollinger Band" (mBB). SPX would have had to close on Thursday above 7,600 to stop out that sell signal. It came close, but the signal is still in place.
Equity-only put-call ratios have become subdued this week due to heavy call buying. The standard ratio is declining again and making new relative lows. Thus, its sell signal of last week has been stopped out. The weighted ratio is still clinging to its sell signal from a week ago, as it has yet to fall to new relative lows.
Market breadth has been relatively strong, although it was mixed Wednesday. Regardless, both breadth oscillators remain on buy signals at this point. Moreover, cumulative volume breadth (CVB) has made new all-time highs, both in terms of NYSE data and "stocks only" data. That is strong confirmation of the new highs recently posted by SPX itself. "Normal" cumulative breadth - the mere running sum of daily advances minus declines - has not yet made a new all-time high, although it is not far from doing so.
New highs on the NYSE numbered more than 100 for the second straight day, so a new buy signal has been issued by this indicator. The last such buy - lasting from April 9 to May 13 - registered a gain of more than 60 points for the SPY SPY ETF (600 points for SPX). This new buy signal will remain in effect until new lows outnumber new highs on the NYSE for two consecutive days.
VIX VIX has been slowly declining, and so a trend of VIX buy signal is in place. Yesterday, VIX closed at its lowest level since late last January. With VIX trending lower, stocks should be trending higher. This buy signal will remain in effect until VIX closes above its 200-day moving average, which is currently at 18.40.
The construct of volatility derivatives remains strongly positive for stocks. Both term structures are sloping upwards, and the VIX futures are trading with a large premium to VIX.
So, the picture is still quite bullish - especially the SPX chart itself. We will continue to monitor individual indicators and act on them accordingly when confirmed signals are generated. As always, we will be rolling deeply in-the-money calls up to higher strikes.
New buy signal for SPY
There is a new buy signal from the "new highs vs. new lows" indicator. On the NYSE, new 52-week highs have numbered more than 100 for each of the past two days, and have also outnumbered new lows on those days. That is a buy signal for the broad stock market. It will remain in effect until new lows exceed new highs for two consecutive days. The last such buy signal came on April 9 and lasted through May 13 - a strong signal.
Buy 1 SPY (July 17) at-the-money call and sell 1 SPY (July 17) call with a striking price 25 points higher.
We will hold this position until new lows exceed new highs on the NYSE for two consecutive days. Roll both sides up 25 points if SPY trades at the higher strike.
Earnings in focus next week
The pace of quarterly earnings reports is slowing. Seven stocks reporting next week are particularly interesting, including Ciena $(CIEN)$, Dollar General $(DG)$, DocuSign $(DOCU)$, Lululemon (LULU), Macy's (M), Palo Alto Networks (PANW) and Ulta Beauty $(ULTA)$.
LULU has posted some large earnings surprises over the years. The ones that we look for as earnings "surprises" have a particular pattern of implied volatility heading into the earnings. Last week, the big mover turned out to be Snowflake (SNOW), and that move is affecting other stocks in its sector, including MongoDB $(MDB)$.
The accompanying ULTA two-year chart has two graphs on it. It shows the stock price on the bottom and implied volatility on the upper graph. One can see that implied volatility increases into a spike and then plunges, creating a "sawtooth" pattern.
These implied volatility increases occur as the earnings date approaches. Then implied volatility plunges after the earnings are announced. It is actually something of an optical illusion, for the options are not getting more expensive in terms of price as the earnings date approaches, but they are remaining the same price. That is, the option trading "universe" prices the straddle prior to the earnings and more or less keeps it at that price until the earnings are announced.
An option that doesn't lose value to time decay (which these don't over the couple of weeks heading into the earnings) thus has the appearance of increasing implied volatility. So, every week when we publish the list of potential post-earnings moves, they are stocks that have this sawtooth pattern surrounding past earnings dates.
The following table shows the stocks that are reporting earnings next week. This list normally is comprised of stocks whose options have increased implied volatility. That is, the option market is expecting a potentially volatile move after the earnings news.
Our approach is to attempt to buy the shortest-term straddle possible (generally the one expiring on the Friday after the earnings reporting date) and to exit at the close of the first full day of trading after the earnings have been reported. For the stock listed in this table, that would mean buying the straddles expiring on June 5.
Specifically, the columns below (from left to right) are:
Date: The earnings reporting date
PM?: Whether the earnings are to be reported before the market opens ("AM") or after the market closes ("PM")
Symbol: The stock symbol
Needed: The most that we would pay for that near-term straddle, with the price of the straddle expressed as a percentage of the underlying stock price. In reality, this is the percentage move that is smaller than six of the past ten post-earnings moves in this stock.
Optvol: The 20-day average of total option volume on this stock. Low numbers here indicate a potentially illiquid situation.
Date PM? Needed OptVol 6/1/2026 PM CRDO 13.97% 17,413 6/2/2026 AM DG 6.13% 6,228 6/2/2026 AM SIG 11.94% 815 6/2/2026 PM GTLB 10.59% 7,822 6/2/2026 PM PANW 5.41% 37,393 6/2/2026 PM ULTA 8.98% 1,682 6/3/2026 AM M 3.36% 10,904 6/3/2026 PM AVGO 8.64% 195,609 6/4/2026 AM CIEN 9.24% 3,419 6/4/2026 PM DOCU 4.74% 5,026 6/4/2026 PM IOT 13.60% 3,923 6/4/2026 PM LULU 9.60% 22,450
At the current time, none of the "at-the-money" straddles on stocks in the above table are trading for less than the "needed" percentage (although ULTA and DOCU are not far away). But prices do change prior to the actual earnings announcement. All items in the table should be checked just before the earnings are announced, for that would be the time to buy the straddles or strangles if they do satisfy the "needed" requirement.
New recommendation: RTX Corp.
There is a new weighted put-call ratio buy signal for RTX $(RTX)$. It comes at about the same level as a year ago, which set off a long rally. Both of these are marked with "B" on the accompanying chart of RTX. As for the stock chart itself, RTX has been building a base between $172 and $180 and if it can break out above $180, that would be a bullish move.
Conditional call buy in RTX: If RTX closes above 180, then buy 2 RTX (June 18) 180 calls in line with the market.
As usual, if these calls are bought, we will hold as long as the weighted put-call ratio for RTX remains on a buy signal.
Follow-up action:
All stops are mental closing stops unless otherwise noted.
We are using a standard rolling procedure for our SPY spreads: In any vertical bull or bear spread, if the underlying hits the short strike, then roll the entire spread. That would be roll up in the case of a call bull spread or roll down in the case of a bear put spread. Stay in the same expiration and keep the distance between the strikes the same unless otherwise instructed.
Also, for outright long options, roll if they become 8 points in-the-money.
Long 1 TSEM (June 5) 295 call and short 1 TSEM (June 5) 320 call. The position has been rolled up many times, including again on May 26. Going forward, roll up - 25 points on each side - if TSEM $(TSEM)$ trades at 320 or higher.
Long 1 BKR $(BKR)$ (July 17) 65 call and long 1 BKR (July 17) 60 put: Roll the call up at 75 and roll the put down at 50.
Long 0 SFL (Aug. 21) 13 calls: The calls were stopped out when SFL $(SFL)$ closed below 11.80 on May 27.
Long 2 MHK (June 18) 105 calls. We will hold these calls as long as the weighted put-call ratio of MHK $(MHK)$ remains on a buy signal.
Long 1 BNS (Sept. 18) 75 straddle: Roll the calls up to the 85 strike if BNS $(BNS)$ trades at 85. Similarly, roll the puts down to the 65 strike if BNS trades at 65.
Long 2 USO USO (June 18) 100 puts and short 2 USO (June 18) 90 puts: Continue to hold without a stop for now.
Long 4 SATL $(SATL)$ (June 18) 8 calls: Raise the trailing closing stop to 8.50.
Long 5 DGXX $(DGXX)$ (June 18) 7 calls: The trailing closing stop is 6.30 for these calls.
Long 1 SPY (June 26) 740 put and short 1 SPY (June 26) 700 put: We will hold this spread as long as either of the two equity-only put-call ratios remains on a sell signal. In addition, we would stop ourselves out of this position if the ratios fall back to new lows, below last week's lows.
Send questions to: lmcmillan@optionstrategist.com.
MW These 7 stocks pack explosive 'sawtooth' earnings volatility next week
By Lawrence G. McMillan
The S&P 500 is flashing a green light to investors
The S&P 500 Index SPX is roaring to all-time highs and the general market rally continues to widen. Record highs were registered this week by the Dow Jones Industrial Average DJIA, Nasdaq 100 NDX and the Russell 2000 RUT. First support for SPX continues to be 7,330, with various support levels below that down to 7,000.
The MVB sell signal is still in place, since SPX has not closed above its +4<SIGMA> "modified Bollinger Band" (mBB). SPX would have had to close on Thursday above 7,600 to stop out that sell signal. It came close, but the signal is still in place.
Equity-only put-call ratios have become subdued this week due to heavy call buying. The standard ratio is declining again and making new relative lows. Thus, its sell signal of last week has been stopped out. The weighted ratio is still clinging to its sell signal from a week ago, as it has yet to fall to new relative lows.
Market breadth has been relatively strong, although it was mixed Wednesday. Regardless, both breadth oscillators remain on buy signals at this point. Moreover, cumulative volume breadth (CVB) has made new all-time highs, both in terms of NYSE data and "stocks only" data. That is strong confirmation of the new highs recently posted by SPX itself. "Normal" cumulative breadth - the mere running sum of daily advances minus declines - has not yet made a new all-time high, although it is not far from doing so.
New highs on the NYSE numbered more than 100 for the second straight day, so a new buy signal has been issued by this indicator. The last such buy - lasting from April 9 to May 13 - registered a gain of more than 60 points for the SPY SPY ETF (600 points for SPX). This new buy signal will remain in effect until new lows outnumber new highs on the NYSE for two consecutive days.
VIX VIX has been slowly declining, and so a trend of VIX buy signal is in place. Yesterday, VIX closed at its lowest level since late last January. With VIX trending lower, stocks should be trending higher. This buy signal will remain in effect until VIX closes above its 200-day moving average, which is currently at 18.40.
The construct of volatility derivatives remains strongly positive for stocks. Both term structures are sloping upwards, and the VIX futures are trading with a large premium to VIX.
So, the picture is still quite bullish - especially the SPX chart itself. We will continue to monitor individual indicators and act on them accordingly when confirmed signals are generated. As always, we will be rolling deeply in-the-money calls up to higher strikes.
New buy signal for SPY
There is a new buy signal from the "new highs vs. new lows" indicator. On the NYSE, new 52-week highs have numbered more than 100 for each of the past two days, and have also outnumbered new lows on those days. That is a buy signal for the broad stock market. It will remain in effect until new lows exceed new highs for two consecutive days. The last such buy signal came on April 9 and lasted through May 13 - a strong signal.
Buy 1 SPY (July 17) at-the-money call and sell 1 SPY (July 17) call with a striking price 25 points higher.
We will hold this position until new lows exceed new highs on the NYSE for two consecutive days. Roll both sides up 25 points if SPY trades at the higher strike.
Earnings in focus next week
The pace of quarterly earnings reports is slowing. Seven stocks reporting next week are particularly interesting, including Ciena (CIEN), Dollar General (DG), DocuSign (DOCU), Lululemon (LULU), Macy's (M), Palo Alto Networks (PANW) and Ulta Beauty (ULTA).
LULU has posted some large earnings surprises over the years. The ones that we look for as earnings "surprises" have a particular pattern of implied volatility heading into the earnings. Last week, the big mover turned out to be Snowflake (SNOW), and that move is affecting other stocks in its sector, including MongoDB (MDB).
The accompanying ULTA two-year chart has two graphs on it. It shows the stock price on the bottom and implied volatility on the upper graph. One can see that implied volatility increases into a spike and then plunges, creating a "sawtooth" pattern.
These implied volatility increases occur as the earnings date approaches. Then implied volatility plunges after the earnings are announced. It is actually something of an optical illusion, for the options are not getting more expensive in terms of price as the earnings date approaches, but they are remaining the same price. That is, the option trading "universe" prices the straddle prior to the earnings and more or less keeps it at that price until the earnings are announced.
An option that doesn't lose value to time decay (which these don't over the couple of weeks heading into the earnings) thus has the appearance of increasing implied volatility. So, every week when we publish the list of potential post-earnings moves, they are stocks that have this sawtooth pattern surrounding past earnings dates.
The following table shows the stocks that are reporting earnings next week. This list normally is comprised of stocks whose options have increased implied volatility. That is, the option market is expecting a potentially volatile move after the earnings news.
Our approach is to attempt to buy the shortest-term straddle possible (generally the one expiring on the Friday after the earnings reporting date) and to exit at the close of the first full day of trading after the earnings have been reported. For the stock listed in this table, that would mean buying the straddles expiring on June 5.
Specifically, the columns below (from left to right) are:
Date: The earnings reporting date
PM?: Whether the earnings are to be reported before the market opens ("AM") or after the market closes ("PM")
Symbol: The stock symbol
Needed: The most that we would pay for that near-term straddle, with the price of the straddle expressed as a percentage of the underlying stock price. In reality, this is the percentage move that is smaller than six of the past ten post-earnings moves in this stock.
Optvol: The 20-day average of total option volume on this stock. Low numbers here indicate a potentially illiquid situation.
Date PM? Needed OptVol 6/1/2026 PM CRDO 13.97% 17,413 6/2/2026 AM DG 6.13% 6,228 6/2/2026 AM SIG 11.94% 815 6/2/2026 PM GTLB 10.59% 7,822 6/2/2026 PM PANW 5.41% 37,393 6/2/2026 PM ULTA 8.98% 1,682 6/3/2026 AM M 3.36% 10,904 6/3/2026 PM AVGO 8.64% 195,609 6/4/2026 AM CIEN 9.24% 3,419 6/4/2026 PM DOCU 4.74% 5,026 6/4/2026 PM IOT 13.60% 3,923 6/4/2026 PM LULU 9.60% 22,450
At the current time, none of the "at-the-money" straddles on stocks in the above table are trading for less than the "needed" percentage (although ULTA and DOCU are not far away). But prices do change prior to the actual earnings announcement. All items in the table should be checked just before the earnings are announced, for that would be the time to buy the straddles or strangles if they do satisfy the "needed" requirement.
New recommendation: RTX Corp.
There is a new weighted put-call ratio buy signal for RTX (RTX). It comes at about the same level as a year ago, which set off a long rally. Both of these are marked with "B" on the accompanying chart of RTX. As for the stock chart itself, RTX has been building a base between $172 and $180 and if it can break out above $180, that would be a bullish move.
Conditional call buy in RTX: If RTX closes above 180, then buy 2 RTX (June 18) 180 calls in line with the market.
As usual, if these calls are bought, we will hold as long as the weighted put-call ratio for RTX remains on a buy signal.
Follow-up action:
All stops are mental closing stops unless otherwise noted.
We are using a standard rolling procedure for our SPY spreads: In any vertical bull or bear spread, if the underlying hits the short strike, then roll the entire spread. That would be roll up in the case of a call bull spread or roll down in the case of a bear put spread. Stay in the same expiration and keep the distance between the strikes the same unless otherwise instructed.
Also, for outright long options, roll if they become 8 points in-the-money.
Long 1 TSEM (June 5) 295 call and short 1 TSEM (June 5) 320 call. The position has been rolled up many times, including again on May 26. Going forward, roll up - 25 points on each side - if TSEM (TSEM) trades at 320 or higher.
Long 1 BKR (BKR) (July 17) 65 call and long 1 BKR (July 17) 60 put: Roll the call up at 75 and roll the put down at 50.
Long 0 SFL (Aug. 21) 13 calls: The calls were stopped out when SFL (SFL) closed below 11.80 on May 27.
Long 2 MHK (June 18) 105 calls. We will hold these calls as long as the weighted put-call ratio of MHK (MHK) remains on a buy signal.
Long 1 BNS (Sept. 18) 75 straddle: Roll the calls up to the 85 strike if BNS (BNS) trades at 85. Similarly, roll the puts down to the 65 strike if BNS trades at 65.
Long 2 USO USO (June 18) 100 puts and short 2 USO (June 18) 90 puts: Continue to hold without a stop for now.
Long 4 SATL (SATL) (June 18) 8 calls: Raise the trailing closing stop to 8.50.
Long 5 DGXX (DGXX) (June 18) 7 calls: The trailing closing stop is 6.30 for these calls.
Long 1 SPY (June 26) 740 put and short 1 SPY (June 26) 700 put: We will hold this spread as long as either of the two equity-only put-call ratios remains on a sell signal. In addition, we would stop ourselves out of this position if the ratios fall back to new lows, below last week's lows.
Send questions to: lmcmillan@optionstrategist.com.
(MORE TO FOLLOW) Dow Jones Newswires
May 29, 2026 09:19 ET (13:19 GMT)
MW These 7 stocks pack explosive 'sawtooth' -2-
Lawrence G. McMillan is president of McMillan Analysis, a registered investment and commodity trading advisor. McMillan may hold positions in securities recommended in this report, both personally and in client accounts. He is an experienced trader and money manager and is the author of "Options as a Strategic Investment." www.optionstrategist.com
(c)McMillan Analysis Corporation is registered with the SEC as an investment advisor and with the CFTC as a commodity trading advisor. The information in this newsletter has been carefully compiled from sources believed to be reliable, but accuracy and completeness are not guaranteed. The officers or directors of McMillan Analysis Corporation, or accounts managed by such persons may have positions in the securities recommended in the advisory.
-Lawrence G. McMillan
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 29, 2026 09:19 ET (13:19 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments