Is This the Most Important Earnings Week of the Year?

Is this the most important earnings week of the year or the start of a new market regime? As Big Tech reports roll in, we unpack the surprising rise in volatility, booming demand for upside exposure and how AI is reshaping the outlook for the Nasdaq 100.

Summary – IBKR Podcasts Ep. 377

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Andrew Wilkinson 

Welcome everybody. We’re going to record this midweek minute a little early. It’s Tuesday afternoon coming into the close. This is Andrew Wilkinson at Interactive Brokers, and I am joined by Kevin Davitt, Head of Index Options Content at the Nasdaq. Welcome back, Kevin. How are you? 

Kevin Davitt 

Thank you for having me back. I’m excited to be here and I’m doing well. 

Andrew Wilkinson 

Great. Let me throw it at you. The Wall Street Journal tells me that, , the, the, the markets aren’t doing so well, and Nasdaq down by over 1%. On the one hand, Kevin, investors seem to be slowly extrapolating the total lack of success in the negotiations between the US and Iran to open the Straits of Horus and the war. On the other hand, I’m seeing more wobbles from the impact of AI. I’m sure it’s both but give us your assessment. Where are we today? 

Kevin Davitt 

You are right. I, I would say on like a close over close basis, we can extrapolate too much, but the point, the big picture points you make about geopolitical concerns still existing and moving into a topic that, that maybe we’ll touch on in the next couple of minutes, but earnings and the importance of AI and growth forecasts, particularly this week. With respect to the NASDAQ 100 as well as the S&P 500 and looking at market cap, this is the most influential week for earnings. And what we have seen play out of late, which, just framing this in terms of April, has been a blockbuster month, is a wobble into earnings. Big picture. What I think we see is higher lows in macro volatility, like relative to the, the beginning of the Iran conflict. And over the past two weeks we’ve seen an unusual dynamic where index levels, index prices have increased on a week over week basis, but so too has forward volatility, or expected volatility. And that’s unusual. So I think you see that uncertainty pricing ratcheting slightly higher despite markets that continue to grind higher at the index level. 

Andrew Wilkinson 

Okay, we’ll come back to the point about volatility in a moment, Kevin, but you mentioned, let’s take that one first. What do we have coming up and what should we be looking for? 

Kevin Davitt 

As mentioned in terms of market cap influence at the index level, the most influential week of earning season. So Wednesday after the close, it’ll be April 29th, I believe. We expect reports from Amazon, Meta, Alphabet, and Microsoft. I mean, you’re talking about a huge constituency reporting tomorrow after the close. One of the other bells of the ball in terms of Nasdaq 100 performance and influence this year, Western Digital, I think, is Thursday. Like this week is hugely important. The dynamic that your audience and option traders, I think, in particular, see the market through will probably observe is that at the constituent level, at the single name volatility level, it remains elevated. That is typical into an uncertain event like earnings, but at the index level, volatility remains muted. So if you distill that out, what we have seen for the better part of 2026 and reemerging since markets found support in late March has been a low correlation, high dispersion move higher where you see names like last week, Intel really outperforming and pulling the AI sort of sentiment higher, but software lagged again and index and constituent volatility move differently. 

At the moment, we see elevated single name volatility and relatively normal index volatility. Not unusual in the middle of an earning season. 

Andrew Wilkinson 

Now, Kevin, we’ve recouped most of the losses that occurred since the war broke out, I believe. You mentioned volatility, forward volatility, implied volatility, is getting more elevated. Just kind of define that for us, please. 

Kevin Davitt 

Arguably most interesting dynamic, at least from my standpoint, has been the breakdown in what is typically a negative correlation between index performance and expected volatility. What I mean by that is typically when you see the markets move higher, expected volatility declines. We have not seen that over the past couple of weeks. That’s interesting. What is even more interesting when you sort of peel back a layer or two from that, and particularly pronounced in the NASDAQ 100, is that the bid, the demand side has really percolated on the out of the money call. So the right side of the distribution. If you’re thinking in terms of normal distribution, that’s where we’ve seen the most pronounced sort of demand for optionality. 

That is a 180-degree turn from what we saw toward the end of last month, the end of March, where the market was scurrying for downside protection and not the least bit concerned about upside. Those dynamics, those shifts can open up opportunity. And even for those that are maybe not using options that specifically, it’s instructive to see where sort of demand is. I think big picture, some institutions were arguably underexposed after kind of reducing some of the tech focused exposure in Q1, and they have been looking to sort of re-lever via the options and index options market. It’ll be fascinating to see how it plays out as these earnings come in and as we move into May. 

Andrew Wilkinson 

I’m struggling there a little bit to understand that. Is it the lack of willingness to sell upside opportunity, or are you saying it’s pent-up demand? 

Kevin Davitt 

The way I’m looking at this in terms of where volatility levels typically are for, let’s say a one month or three month, 25 delta call, relative to a month ago, and a month ago those volatility levels were exceptionally low relative to history and relative to other indices. Now that is not the case. The demand has been, I need some upside exposure. And really it seems to have kind of an AI semi tilt. And one of the ways institutions and individuals can get that at the index level is with things like out of the money NDX options. And so from a volatility perspective, looking at that in terms of supply and demand, if the market continues to bid for one month upside NDX, that tends to push volatility and prices higher. And that is what we’ve seen over the past couple of weeks. 

Andrew Wilkinson 

Brilliant, great explanation. Kevin Davitt, Head of Index Content at the Nasdaq. Thank you very much for joining us. 

Kevin Davitt 

My pleasure. Thank you for having me. 

Andrew Wilkinson 

All right, and to the audience, thank you for taking the time to listen to today’s podcast. And don’t forget, if you like it, click the like button and subscribe wherever you download your podcasts from. Bye for now.