What actually moves price on a news release — the number or the surprise?
The surprise: Actual−Consensus.
Define "priced in."
The market's expectation is already reflected in the current price, so an expected outcome causes little movement.
Write the first-order formula for the price move on news.
ΔP≈f′(E[X])⋅(Actual−Consensus).
Why can a company beat profit expectations yet still fall?
If Actual < Consensus the surprise is negative even if profits are positive.
What is IV crush?
The collapse of event-driven implied volatility the moment a scheduled number is released, deflating option premiums.
Why can an options buyer be right on direction but still lose?
IV crush removes the event volatility premium they paid, exceeding the directional gain.
When a rate hike is fully expected, what usually moves the market instead?
The forward guidance/tone — the new, un-priced information.
Name three high-impact scheduled events.
Interest-rate decisions, CPI/inflation, employment (NFP), also GDP and earnings.
What does the sensitivity term f′ represent?
How strongly this particular asset's price responds to that data driver.
Recall Feynman: explain to a 12-year-old
Imagine your class already guesses you'll score 90 on a test. If you get exactly 90, nobody is surprised — no one gasps. But if you get 60, everyone reacts! The stock market is the same: prices already "guess" the news. They only jump when reality is different from the guess. And right before results come out, everyone is nervous and pays extra for "reaction tickets" (options); the moment the result is known, the nervousness disappears and those tickets get cheaper — even if you guessed the direction right.
Dekho, sabse important baat: market news se nahi, surprise se hilta hai. Agar sab log pehle se expect kar rahe the ki company ka profit accha aayega, to wo expectation already price mein "priced in" ho chuka hai. Isko simple formula se samjho: ΔP≈f′×(Actual−Consensus). Yani jitna zyada actual number consensus (analysts ka average guess) se alag hoga, utna bada move hoga. Agar Actual = Consensus, to surprise zero, aur move bhi almost zero — chahe number kitna bhi "accha" dikhe.
Isliye kabhi kabhi company achha profit deti hai phir bhi stock gir jaata hai — kyunki market usse bhi zyada expect kar rahi thi (Actual < Consensus, negative surprise). Yahi galti naye traders karte hain: headline dekh ke buy kar dete hain. Sahi tareeka hai Actual ko Consensus se compare karna.
Ab options waale trap ko samjho — IV crush. Result se pehle uncertainty high hoti hai, isliye options mahenge ho jaate hain (event variance add ho jaata hai). Jaise hi number aata hai, uncertainty khatam, aur option premium gir jaata hai. Isliye tum direction sahi guess kar ke bhi paisa haar sakte ho, agar surprise itna bada nahi tha ki wo mehenga premium recover kar sake.
Practical tip: high-impact events (RBI/Fed rate, CPI, NFP, earnings) ke time volatility aur risk dono zyada hote hain. Ya to event se pehle position halka rakho, ya reaction settle hone ke baad established trend ko trade karo. Yaad rakho — No surprise, No move (SASS).
