The pace of second-quarter earnings releases is slowing dramatically, but there are still some good opportunities for investors to profit from certain option strategies. Take Cisco, for example.

The accompanying two-year chart has two graphs on it. It shows Cisco's stock price $(CSCO)$ at the bottom and implied volatility on the upper graph. One can see that implied volatility increases every few months into a spike and then plunges, creating a sawtooth pattern.

These implied volatility increases occur as the earnings date approaches. Once the results are announced, implied volatility typically plunges. It is actually something of an optical illusion, as the options are not getting more expensive in terms of price as the earnings date approaches. They actually remain 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 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 some of the companies 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 and has factored this into the price of the contract.

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 stocks listed in this table, that would mean buying the straddles expiring on Aug. 14, or the next nearest date if that expiration date not exist for a particular stock.

Date: The earnings reporting date. Time: Whether earnings are released AM - before the open - or PM - after the close. Symbol: Ticker symbol. Cost: Price of the straddle expressed as a percentage of the underlying stock price. OptVol: The 20-day average of total option volume.

Stock-market insight: S&P 500 chart turns bullish

The stock market, as measured by the S&P 500 index SPX, finally broke out to new all-time highs and has held the breakout level amid a flurry of heavy buying.

The S&P 500 advanced 136 points, or 1.8%, on Aug. 4 and was up more than 150 points at one time intraday. The 136-point gain is the 12th largest point gain in history. Of course, it's nowhere near the largest percentage gains of all time, but still: This is impressive.

Once the index broke out to new all-time highs, that just added more fuel to the fire. It's hard to name all the bullish components that are working here, but FOMO - fear of missing out - is now one of them, with the index at new all-time highs and many portfolio managers not fully invested.

The irony of the situation is that just a week ago, on July 29, after the Fed made some hawkish comments (but did not raise rates), traders sold into the close that Wednesday. Those sellers are probably still trying to buy everything back. Other factors are certainly contributing as well: the entire Iran-related situation (oil, war/peace, Strait of Hormuz), corporate earnings (Microsoft $(MSFT)$ and Palantir (PLTR)) and short covering.

From that July 29 low, SPX rocketed 477 points higher in less than five trading days. After that, it backed off a little on what seemed like normal profit-taking rather than any sort of blowoff capitulation. SPX has now closed above the old highs (7,620) seen in early June for two consecutive days, and that is bullish for the SPX chart itself. Those old highs now act as support.

There is a gap on the chart (pink circle) that is right over the old highs (horizontal red line). There is now minor resistance at Wednesday's highs (7793). SPX touched the +4<SIGMA> "modified Bollinger band" yesterday but did not close above it.

Despite this very strong advance by the SPX, market internals have not been great. Therefore, the equity-only put-call ratios remain on sell signals. They have rolled over slightly, but not enough for the computer analysis programs to declare a buy signal yet. They need to trend downward in order for a confirmed buy signal to take place.

Market breadth has been sporadic and was negative on Aug. 5 when SPX reached its highest-ever intraday point so far. Even so, the "stocks only" breadth oscillator has closed above +200 for two consecutive days, and that means it has rolled over to a buy signal. However, the NYSE-based breadth oscillator has not. It remains on a sell signal.

So until these two are in agreement, we won't take a position based on them.

New 52-week highs on the NYSE continue to outnumber new lows, so this indicator remains positive. The Cboe Volatility Index VIX rose during early trading Wednesday - continuing that recent short-term oddity of "SPX up, VIX up." That's quite unusual when SPX is up so much. But it continues to reflect the fact that investors and traders alike are buying puts along with buying stocks.

Buying SPX puts as general portfolio protection inflates the VIX, while buying individual equity puts keeps the equity-only put-call ratios high. Regardless, the trend of a VIX buy signal for the stock market remains in place, because the VIX is below its 200-day moving average.

There was some activity above the 200-day moving average (green circle on the VIX chart), but VIX only closed above 19 on one day. By the close of trading on August 5, VIX had settled in near 16 once again. Thus the trend of VIX buy signal for stocks is still in place. VIX would have to close above 19 for two consecutive days to cancel out this buy signal.

Finally, the construct of volatility derivatives remains bullish for stocks. That is, the term structures of VIX futures and of the Cboe Volatility Index continue to slope upwards. The August VIX future is the front month now, and as long as it is trading at a lower price than the September VIX future, that is bullish for stocks.

So, we have the bullish confirmation from the SPX chart but did not get new confirmed buy signals elsewhere - at least not so far. If those confirmations arise, we will act on them. In addition, we are rolling up the two SPY bull spreads where the long call was deeply in the money, as is our wont.

New recommendation: Essex Property Trust

There is a new weighted put-call ratio sell signal in Essex Property Trust $(ESS)$, which operates as a real estate investment trust. The stock recently broke down below support at $291 and has since rallied back toward that area, which should now act as resistance.

In the past year, there were two reasonably good sell signals in this stock (red "S" on the accompanying put-call ratio chart of ESS). And now a new sell signal (local minimum on the put-call ratio chart) is in place. This sell signal is coming from an extremely overbought situation. That is, the ratio is much lower on the chart than it was for the two previous sell signals. It drifted all the way down to 40, which means that only $40 was being spent on puts for every $100 being spent on calls. Altogether, this creates a sell signal.

Buy 2 ESS (Sept. 18) $280 puts in line with the market. (ESS: 285.90 ESS (Sept. 18) 280 put: $4.00 bid, offered at $6.00.)

As usual, we will hold these puts as long as the weighted put-call ratio for ESS remains on a sell signal.

New recommendation: CVS Health

There is a new weighted put-call ratio sell signal in CVS Health. The stock $(CVS)$ broke down sharply after the health-services company reported earnings on Aug. 5. The put-call ratio sell signal had already been in effect before that, but the breakdown was significant because it violated what had been support at $104.

In the past year, two similar sell signals in CVS did not pan out, but now with the breaking of support, it seems that this one might fare better.

Buy 2 CVS (Sept. 18) $97.5 puts in line with the market. (CVS: 96.62 CVS (Sept. 18) 97.5 put: $3.95 bid, offered at $4.10.)

As usual, we will hold these puts as long as the weighted put-call ratio for CVS remains on a sell signal.