What is the expected impact on the stock’s implied volatility and options pricing after the earnings release?
Impact on Implied Volatility (IV) and Options Pricing
Because Braze (BRZE) is announcing a post‑market earnings release (the results will be released after the close on Sept 4, 2025), the market’s current implied‑volatility (IV) curve will be elevated ahead of the announcement. The positive sentiment score (10/10) and the fact that this is a single‑day earnings event (no surprise policy or product launch attached) means traders will already have priced a modest “earnings‑risk premium” into the option chain—typically a 10‑15 % IV uplift relative to the 30‑day historical average.
Once the numbers are disclosed, IV is expected to contract sharply (often 40‑60 % of the pre‑event premium) as the uncertainty that the market has been pricing disappears. The magnitude of the compression will be driven by the surprise element: if the beat/miss is modest, the IV drop will be close to the pre‑earnings premium; a large beat or miss can produce a secondary “post‑earnings IV bounce” (a short‑lived re‑spike) as traders re‑price forward‑looking expectations (e.g., guidance, margin trends). In practice, you’ll see tightening of bid‑ask spreads and a steepening of the volatility surface—out‑of‑the‑money (OTM) strikes will lose the most premium, while at‑the‑money (ATM) and slightly in‑the‑money (ITM) contracts will retain relatively more value because they carry more of the underlying‑price risk.
Actionable Trading Implications
Pre‑earnings (now‑through close) – Consider selling a short‑dated straddle/strangle or selling delta‑neutral calendars to capture the inflated IV. The optimal strike range is roughly 0‑5 % in‑the‑money to 5‑10 % OTM, where the IV premium is highest and the gamma exposure is moderate. Keep position size small (≤2 % of portfolio) because the move can be volatile if the results deviate sharply from consensus.
Post‑earnings (open‑market) – If you own the pre‑earnings position, close it immediately after the price stabilizes (typically within 15‑30 min) to lock in the IV crush. If you anticipate a sustained directional move (e.g., strong guidance that could lift the stock 6‑8 % on the day), you can roll the short‑dated spread into a longer‑dated directional call/put spread to capture the new trend while the IV has already collapsed.
Risk Management – Set a tight stop (e.g., 30 % of premium collected) and monitor the underlying’s pre‑market volume; a sudden price swing (>2 %) before the close could signal an early leak, in which case you should exit the position to avoid a “short‑gamma” squeeze. The combination of high pre‑earnings IV and low liquidity on the 1‑day expiry makes these positions sensitive to sudden spikes, so keep the position size modest and monitor the IV surface for any abnormal skews.
In short, expect significantly higher IV before the September 4 earnings and a sharp IV compression after the release. Use the pre‑earnings IV premium to collect premium via neutral or short‑volatility structures and be ready to roll or close immediately once the earnings data eliminates uncertainty and compresses the options market.