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Earnings Season Options Strategy | PDD Holdings Faces Major Test: When the Market Is Extremely Panicked, Is Opportunity Emerging?

*The following content and data are as of the close of the US stock market on March 20, 2026. This article is for investment education purposes only and does not constitute any investment advice.

$PDD Holdings (PDD.US)$ PDD Holdings is set to release its Q4 and full-year earnings for the fiscal year 2025 before the US stock market opens on March 25 (Wednesday). The earnings call will be held at 19:30 Beijing time that evening. As one of the most disruptive and controversial names in China's e-commerce space,What should we focus on in this earnings report? How can beginners participate while controlling risks and seizing potential opportunities?

Let’s first take a look at recent market performance.

As of the close of the US stock market on March 20,$PDD Holdings (PDD.US)$ PDD Holdings’ stock price was $96.19, having fallen more than 30% from its high of $139.41 last year. Market sentiment is extremely pessimistic. Several key technical indicators (such as WMSR, OSC, CCI, RSI) show that the stock price is in a severely oversold zone, which may indicate that selling pressure has been exhausted in the short term, suggesting the possibility of a technical rebound.

After the sharp drop in stock price, the company’s trailing twelve-month (TTM) P/E ratio stands at just 9.61 times, already falling to its lowest range in nearly a year and significantly lower than the industry average. Simply put, the current market valuation of PDD Holdings already reflects very poor expectations. This earnings release will test whether these dire forecasts come true or if there is potential for an unexpected surprise.

Turning to options activity, trading was active in the week leading up to earnings. On March 19, put options accounted for 79.60% of total volume, indicating strong hedging or bearish sentiment in the market ahead of the earnings announcement. Meanwhile, implied volatility (IV) remains relatively high at over 50%, with the IV percentile reaching 83%, suggesting that the options market is pricing in the potential for significant fluctuations following the earnings release.

In terms of capital flows, during the three consecutive days of declines from March 18 to March 20, there was a shift from net outflows to net inflows, possibly signaling that some investors are quietly taking positions amid the dip.

Overall, PDD Holdings’ stock price has deeply corrected ahead of earnings, with technical oversold conditions and capital inflows providing support for a potential rebound. However, the options market is betting on significant volatility, and the outcome of this market tug-of-war will become clear after the earnings announcement.

So the question arises, what should we focus on in this earnings report?

The market is primarily concerned about two things.

One is the concern that domestic growth has peaked because$PDD Holdings (PDD.US)$ PDD Holdings' revenue growth has slowed from previous high levels to single digits, with year-over-year revenue growth of only 7.14% and 8.98% in Q2 and Q3 last year, respectively, leading to fears that the main site’s growth story may be over.

The other concern is that the overseas business (Temu) is a bottomless pit of cash burn, with worries that continued losses in this segment could drag down the company's overall profitability.

However, there are also some optimistic and resilient signs in these two quarters of financial data.

On one hand, although total revenue growth has slowed, its way of making money is improving. In Q2 last year, revenue from transaction services (including commissions, etc.) accounted for 46%, almost equal to advertising revenue, indicating that the company is no longer solely reliant on ad sales driven by traffic, and its e-commerce platform foundation is more stable.

On the other hand, PDD Holdings' profitability remains strong. Despite revenue growing by only 9%, the company’s net profit margin increased against the trend to 27.09%. More importantly, the company's ability to generate cash flow is impressive, with free cash flow surging 65.9% year-on-year. This demonstrates that it is a company with healthy profitability and strong cash flow.

In this earnings report, the market needs to see further validation for both the domestic main site and the overseas business Temu.

For the domestic main site, perhaps the focus is not just on growth rates but also on sustainability and health metrics.The phase of rapid user growth has passed, with domestic internet users surpassing the one billion mark, leaving limited room for further expansion. The focus now is on making existing users and merchants more active and profitable.

$PDD Holdings (PDD.US)$The launch of the billion-yuan subsidy and trillion-yuan support plan essentially represents concessions to the ecosystem—management has clearly prioritized these support initiatives over short-term profits, sacrificing near-term profitability for long-term high-quality growth.

Therefore, the key to this quarter's performance lies not in the profit margin figures themselves (the market already expects pressure), but in the efficiency of investment conversion: Are merchants more willing to stay on the platform? Are existing users purchasing more frequently? These are the critical signals to listen for during the earnings call.

From the perspective of revenue structure, detailed observation is also required. Over the past few quarters, online marketing services (advertising) and transaction services (commissions) have each accounted for roughly half of total revenue. Persistent sluggish growth in advertising revenue might reflect a decline in merchants’ willingness to advertise or pressure on the platform’s monetization capabilities; conversely, if transaction service revenue shows significant recovery, it suggests that the trillion-yuan support plan is driving tangible transaction growth and that the ecosystem concession strategy is generating positive feedback.

Regarding overseas operations, Temu is both a source of fear and a beacon of hope.This is current.$PDD Holdings (PDD.US)$This represents the biggest uncertainty and potential catalyst for PDD Holdings currently. At present, Temu's data is disclosed together with domestic operations, and the lack of transparency is one of the core reasons why the market applies a valuation discount—it remains unclear how much Temu is losing and when it will become profitable.

However, any news about narrowing losses at Temu, especially signals of nearing breakeven in key markets like Europe or the US and UK, could serve as a clear positive catalyst. Any specific guidance provided during the earnings call regarding Temu’s regional profitability progress or changes in cash burn rate could boost market confidence and reopen room for valuation recovery.

In addition, some key performance indicators are worth monitoring, such as:

In terms of revenue growth and profit margins, attention should be paid to whether revenue growth can stabilize or slightly exceed expectations. Profit margins reflect the company’s true earning power and need to be monitored to see if they can hold steady amid the trillion-yuan support investment, testing the company’s wisdom in balancing investment and profitability. The market has partially priced in expectations of profit pressure; if the decline in profit margins is less than expected, or if revenue growth exceeds expectations, it will be seen as a positive signal.

It’s also important to look at the revenue structure, which shows whether the company's growth engine is healthy. Attention should be paid to whether the proportion of revenue from more stable trading services continues to increase.

Earnings per share (EPS) directly affects how much money shareholders can make. PDD Holdings has frequently exceeded expectations in previous quarters. Consistently surpassing expectations has been the strongest support for the stock price. So, will this quarter beat market expectations again?

Operating cash flow is the lifeblood of a company’s survival and development, more substantial than book profits. It is crucial to focus on whether strong cash flow growth can be sustained.

Of course, the risks for PDD Holdings are clearly visible.

Domestic e-commerce competition remains intense with pricing wars and traffic battles showing no signs of easing. Competitors like Douyin and Alibaba are eyeing opportunities, continuously suppressing the platform's monetization potential. Overseas, Temu faces a more complex geopolitical and trade regulatory environment. Sticking to the strategy of 'exchanging profits for ecosystem growth' may result in greater earnings volatility than expected, testing investors' patience. These uncertainties weigh heavily on the stock price.

Overall, this earnings report is a stress test for PDD Holdings: when deliberately slowing down and increasing long-term investments, will its core profitability and financial strength (cash flow) stand up to scrutiny?

If positive outcomes occur (e.g., EPS beats expectations again, strong cash flow, good news from Temu), the currently very low valuation could recover quickly, potentially leading to a rebound in stock price. If negative outcomes arise (both revenue and profit significantly miss expectations, and there are no signs of improvement for Temu), then the market's pessimism will be confirmed, and the stock price may continue to face pressure.

For investors,Rather than obsessing over a single figure like revenue growth rate, it’s better to focus on the resilience of the company’s profitability, the health of its cash flow, and management's clear plans for the future.In an extremely pessimistic market, these results could become the key turning point determining the medium-term direction of PDD Holdings.

How can beginners use options to participate in earnings plays?

After understanding market performance and the key points of earnings, the next question is: how should ordinary investors participate? Buying stocks directly is of course the simplest way, but the fluctuations around earnings announcements are often severe, and if the direction is misjudged, losses could be significant.

This is where options provide a more flexible and precise tool. Their core advantage lies in allowing you to choose different strategies based on your varying judgments about earnings, setting a maximum risk in advance while retaining the possibility of profit.

Important note: As mentioned earlier, PDD Holdings' current implied volatility (IV) is relatively high, meaning that option prices are already quite expensive. After the earnings announcement, regardless of whether the stock price rises or falls, IV usually drops quickly, which will cause the time value of the options to shrink rapidly. Therefore, being an option buyer in a high IV environment requires significant stock price movement to cover costs; for sellers, however, high IV might present an opportunity to collect higher premiums.

Below are a few beginner-friendly option strategies tailored to common earnings scenarios.

Scenario One: Bullish on earnings, expecting a stock price rebound – Bull Call Spread

Applicable scenario:Do you think$PDD Holdings (PDD.US)$ If you believe this earnings report could exceed expectations, and given that the stock price has already deeply retraced with valuation at a historical low, you anticipate a notable rebound after the earnings announcement.

Strategy composition:Simultaneously operate two legs — buy a call option with a lower strike price while selling a call option with a higher strike price, both options having the same expiration date.

Strategy Logic:The purchased call gives you the right to benefit from an upward move, while selling the higher strike price call recoups part of the premium, thereby reducing the overall cost of establishing the position. This is essentially a bullish strategy with a cap — you believe the stock price will rise, but expect the increase to be within a reasonable range. Selling the higher strike price call also partially hedges against IV Crush, as the sold leg will depreciate due to a drop in implied volatility (IV), generating some profit.

Profit and loss characteristics:Maximum loss is limited to the net premium paid for both options (i.e., the premium paid for buying the call minus the premium received for selling the call). Maximum profit is limited to (difference between the two strike prices - net premium per share paid) * contract multiplier * number of contracts, achieved when the stock price rises to or exceeds the strike price of the sold call. The breakeven point = lower strike price + net premium per share paid.

Key risks: If the stock price falls sharply, the entire net premium will be lost. If the stock price surges far beyond the strike price of the sold call, the profit is capped, and you won't benefit from excessive gains.

The profit and loss characteristics at expiration can be referenced in the diagram below, provided for educational purposes only and not representing any investment advice:

Scenario Two: Already holding shares and looking to enhance returns around earnings — Covered Call

Applicable scenario:You already hold shares of $PDD Holdings (PDD.US)$ and have a neutral to mildly bullish stance on this earnings period — you think it's unlikely that the stock price will soar significantly in the short term, but you're also not too worried about a sharp decline. You aim to use your current holdings to earn additional income or partially hedge against downside risk.

Strategy composition:Based on holding every 100 shares of PDD Holdings stock, sell one out-of-the-money call option (Call), meaning the strike price is higher than the current stock price. For every 100 shares held, sell 1 Call, ensuring a strict match between the number of shares held and the Calls sold.

Strategy Logic:Selling the Call generates a premium, which you get to keep regardless of how the stock price moves afterward, effectively creating extra income for your stock position. With implied volatility (IV) currently high, option prices are relatively expensive, allowing for more substantial premiums when selling Calls—making this an ideal environment for a covered call strategy. If the stock price rises moderately after earnings are announced but does not exceed the Call’s strike price, you benefit from both the stock's appreciation and the full premium collected—this is the most desirable outcome. If the stock price remains flat or declines slightly, the premium provides some downside protection, reducing your cost basis for holding the stock.

Profit and loss characteristics: Maximum profit is limited to [(Call Strike Price − Cost per Share of Holding + Premium Collected per Share) × Contract Multiplier × Number of Contracts], achieved when the stock price reaches or exceeds the Call strike price, at which point the stock is called away at the strike price, while you retain the premium. Maximum loss occurs in extreme scenarios where the stock price crashes significantly, theoretically falling to zero; however, the premium collected provides some buffer against losses. Thus, maximum loss equals [(Cost per Share of Holding − Premium Collected per Share) × Contract Multiplier × Number of Contracts]. The breakeven point = Cost per Share of Holding − Premium Collected per Share.

Key risks: If earnings far exceed expectations and the stock price soars well above the Call strike price, your stock will be called away at the strike price, preventing you from enjoying any excess gains. Moreover, if earnings disappoint severely and the stock price plummets, the protection offered by the covered call strategy is minimal, with the premium only providing slight cushioning, leaving your position exposed to most of the downside risk, similar to holding the stock outright. Therefore, this strategy suits investors seeking steady growth rather than those with strong predictions about earnings outcomes.

The profit and loss characteristics at expiration can be referenced in the chart below (with the stock purchase cost assumed to be approximately $95 per share), intended for educational purposes only and does not constitute investment advice:

Scenario Three: Expecting Limited Earnings Volatility, Aiming to Profit from High IV Decline – Short Strangle (Selling Strangle Combination)

Applicable scenario: You believe that the market has$PDD Holdings (PDD.US)$ The panic over earnings seems somewhat overdone. You judge that the earnings are likely to be neither too bad nor too good, and you expect the stock price to fluctuate within a certain range after the earnings announcement, without any extreme one-sided moves. You want to profit from the high-certainty event of a significant drop in implied volatility (IV) post-earnings.

Strategy composition: Simultaneously operate two legs — sell an out-of-the-money call option (Call, with a strike price higher than the current stock price), and at the same time sell an out-of-the-money put option (Put, with a strike price lower than the current stock price). Both options have the same expiration date. The two strike prices form a 'safety zone'.

Strategy Logic:You are essentially selling insurance to both the bullish and bearish market participants, collecting double premiums. Your core bet is that the actual stock price movement after the earnings announcement will be smaller than the volatility priced into the options market beforehand. As long as the stock price stays between the two sold option strike prices at expiration, both options will expire worthless, allowing you to keep all the premium collected. In the current high IV environment, the premiums collected are relatively generous, providing a larger safety margin.

Profit and loss characteristics: Maximum profit is limited to the total premium collected from selling the Call and Put. Maximum profit is achieved when the stock price at expiration is between the strike prices of the two sold options. Maximum loss is theoretically unlimited — if the stock price breaks out significantly upward, the sold Call faces unlimited risk; if the stock price crashes downward significantly, the sold Put can lead to substantial losses (up to a complete collapse in stock price). Upper breakeven point = Sold Call strike price + Total premium collected per share; Lower breakeven point = Sold Put strike price - Total premium collected per share.

Key risks: If the earnings result in unexpected extreme volatility, losses could escalate quickly, and theoretically, there is no upper limit — this is a fundamental difference compared to buyer strategies (where the maximum loss is the premium paid). Additionally, since both Calls and Puts are sold naked, the margin requirements are relatively high, and the account needs sufficient funds to maintain the margin. Extreme movements may also lead to margin calls. For a stock like PDD Holdings, where earnings-day fluctuations might exceed 10%, the strike prices need to be set wide enough for safety, but this also means the premiums collected will be reduced, potentially making the risk-reward ratio less favorable than expected. To mitigate risk, consider buying a Put below the current Put strike price and a Call above the current Call strike price to create extreme downside and upside protection.

The profit and loss characteristics at expiration can be referenced in the diagram below, provided for educational purposes only and not representing any investment advice:

If you'd like more inspiration regarding options strategies, you can easily access it via the mobile app or the new desktop platform using the following path!

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