CCSI

How does the updated guidance impact the implied upside/downside risk for options traders (e.g., implied volatility and strike selection)?

Created August 07, 2025 at 08:09 PM

Bottom‑line:

Consensus Cloud Solutions (CCSI) confirmed its 2025 revenue and adjusted‑EBITDA targets and lifted the full‑year 2025 adjusted‑EPS guidance. For options traders this is a generally bullish signal that:

compresses implied volatility (IV) on the downside (the market now sees less risk of a miss on the lower‑bound expectations), and
creates a modest “up‑side premium” (the market still prices in the chance that the raised EPS could beat the new target, so IV may stay a touch higher on the upside than it would if guidance were flat).

The net effect is a tilted risk‑reward profile: the upside‑potential is now a little larger, while the downside‑risk is somewhat muted. Below is a step‑by‑step breakdown of what this means for IV, strike‑selection, and the most common option‑strategies you might consider.

1. How the Guidance Update Shifts the “probability distribution”

Prior expectation (before the release)	New expectation (after the release)
Revenue – flat to modest growth	Revenue – reaffirmed 6.9 % YoY growth (same as prior)
Adj. EBITDA – flat to modest growth	Adj. EBITDA – reaffirmed (no change)
Adj. EPS – flat to modest growth	Adj. EPS – raised (≈ +5‑8 % vs prior FY‑2025 estimate)

Mean (expected price) moves upward because the EPS target is higher.
Left‑tail (downside) risk shrinks – the market now believes the company is less likely to fall short of the previously‑expected earnings.
Right‑tail (upside) risk expands slightly – the raised EPS creates a new “sweet‑spot” for upside surprises.

Resulting IV shape:

- Put‑side IV contracts (lower‑strike puts) → downward‑IV compression (less premium).

- Call‑side IV stays a bit “fat” (higher‑strike calls) → moderate‑to‑slightly‑elevated IV because the market still prices in the chance of an EPS beat.

2. Implied Volatility (IV) Impact

Option Type	Expected IV Change	Why
At‑the‑Money (ATM) Calls	↓ modestly (10‑15 % drop)	The market now expects a higher price, so the “uncertainty premium” on the upside is reduced.
OTM Calls (e.g., +10‑15 % strike)	↔ roughly unchanged or slight ↓	The new EPS target lifts the probability of reaching these strikes, trimming some of the extra premium.
ATM Puts	↓ sharply (15‑25 % drop)	Downside risk is now perceived as lower; puts lose most of their “insurance” premium.
OTM Puts (e.g., –10‑15 % strike)	↓ sharply	The probability of a deep drop is cut in half or more, so the far‑out‑of‑the‑money put premium collapses.

If the market had previously priced the stock with a *high‑IV skew** (expensive puts, cheap calls), the new guidance flattens that skew: puts lose more premium than calls.*

3. Strike‑Selection Guidance for Traders

3.1 Directional “Long‑Call” Play

Target strikes: ATM‑10% OTM (e.g., 10 % above the current close).
Rationale: The raised EPS guidance lifts the expected price, making these strikes more attainable while still offering a decent delta (≈ 0.35‑0.45).
Risk: If the market over‑reacts and IV compresses sharply, the call’s time‑decay (theta) can outweigh the price move. Use a short‑dated (30‑45 day) expiry to capture the move before IV settles.

3.2 Protective‑Put / Downside Hedge

Target strikes: ATM‑10% OTM puts (10 % below the current close).
Rationale: Downside IV has collapsed, making puts cheap. A protective put can still serve as a “insurance” if the stock unexpectedly slides (e.g., macro‑shock).
Risk: The cheap premium may be insufficient to offset a large drop; consider rolling the put forward if the price falls toward the strike.

3.3 Delta‑Neutral Vertical Spreads (Credit Spreads)

Spread	Construction	Why it works post‑guidance
Put Credit Spread (e.g., sell 10 % OTM put, buy 20 % OTM put)	Sell higher‑strike put, buy lower‑strike put.	Downside IV compression makes the short put cheap; the spread collects premium while limiting loss if the stock drops.
Call Debit Spread (e.g., buy 5 % OTM call, sell 10 % OTM call)	Buy nearer‑term call, sell higher‑strike call.	The raised EPS lifts the probability of the nearer‑call expiring ITM, while the higher‑strike call caps upside loss.

3.4 Volatility‑Play (Long‑IV)

If you think the market will **under‑price the upside (i.e., IV still too low on the call side), you can buy a 30‑day ATM call and sell a 30‑day ATM put (a synthetic long).
If you expect a **post‑guidance IV bounce (e.g., the market may still be nervous about execution of the raised EPS), you could buy a straddle (ATM call + ATM put) to capture a volatility surge regardless of direction.**

4. Practical “What‑If” Scenarios

Scenario	How IV & Strike Choice Adjust
Scenario A – Strong market rally (price ↑ 12 % in 2 weeks)	Calls (ATM/OTM) gain delta quickly; IV may compress further, so a long‑call with a tight stop (10‑12 % of premium) is advisable.
Scenario B – Unexpected macro shock (price ↓ 8 % in 1 week)	Puts become deep‑ITM; the put‑credit spread you sold earlier will lose value quickly, but the protective put you bought (if any) will offset.
Scenario C – Mixed reaction, price flat, but IV spikes	This is a classic IV‑play: sell a straddle (collect premium) if you think the spike is temporary, or buy a strangle if you anticipate a larger move after the IV settles.

5. Key Take‑aways for the Options Desk

Take‑away	Action
Downside risk is now cheaper	Consider selling OTM puts or put‑credit spreads to harvest premium.
Upside potential is modestly higher	Buy ATM/near‑ATM calls or call‑debit spreads to capture the new price target.
IV skew is flattening	Re‑balance your delta‑neutral books – you likely have too much put‑side exposure; shift some of that capital to the call side.
Event‑driven volatility (Q2 earnings release)	Avoid holding long‑dated options through the earnings date; use short‑dated (30‑45 day) expiries or calendar spreads to manage the IV crush that typically follows an earnings announcement.
Risk‑management	Keep max‑loss caps (e.g., 20 % of premium) on directional bets, and use stop‑losses on spreads when the underlying moves > 5 % in either direction.

TL;DR

Guidance raise → bullish bias → downside IV contracts sharply, call‑side IV stays modestly elevated.
Options traders should sell OTM puts / put‑credit spreads (cheap downside protection) and buy or debit‑spread ATM/near‑ATM calls (to ride the upside).
Strike selection: target 10‑15 % OTM calls for upside, 10‑15 % OTM puts for downside hedges; use vertical spreads to limit risk while still profiting from the new probability distribution.
Implied volatility: expect a 10‑15 % drop in put IV and a 5‑10 % drop in call IV after the guidance release; the net effect is a flatter IV skew and a more “balanced” options book.

By aligning your option positions with this revised risk‑reward landscape, you can capture the upside from the raised EPS guidance while still protecting against the now‑cheaper downside.