- Revenues from Apple, Amazon, and Alphabet
The options market braced for bigger-than-usual moves in the shares of a trio of trillion-dollar companies the day after quarterly earnings were released.
This is because of the implied volatility, or how much a stock can be expected to move over a certain period, of shares of Apple Inc. AAPL,
+3.39%,
Alphabet Inc. GOOGL,
+6.87%
and Amazon.com Inc. AMZN,
+7.95%
remain high, even if the implied volatility of the S&P 500 SPX index,
+1.64%
fell to its lowest level in 13 months.
The three tech giants are expected to report results for their quarters through December after Thursday’s closing bell.
Read revenue overviews for Apple, Alphabet, and Amazon.
For Apple, an options strategy known as a “straddle” was recently priced for a one-day post-earnings move of $5.79, or 3.9% at current prices, according to data provided by Matt Amberson, Director at Option Research & Technology Services. That’s slightly more than the average move of $5.76, or 3.8%, over the past 12 quarters.
The stock has moved more than 3.9% the day after earnings four times in the past 12 quarters, and most recently after the last quarterly report, according to FactSet data.
A “straddle” is a game of pure volatility that involves the simultaneous purchase of bullish options (calls) and bearish options (puts), with the same strike prices at parity, or targets at current prices, and the same expiration dates. Straddle buyers make money if the stock moves, in either direction, more than the implied expected range. Learn more about overlaps.
Expected ranges are determined by the implied volatility of the stock and the time until option expiration. For Apple, the 30-day implied volatility was recently at 29.7%. This compares to the Cboe VIX Volatility Index,
+2.01%,
known as the VIX, which fell to 17.58% in morning trade on Thursday, the lowest level seen since mid-January 2022.
The VIX represents the expected 30-day volatility for the S&P 500. It is often referred to as the stock market’s “fear gauge” because volatility tends to rise when the stock market is falling and fall when the market is rising.
Based on current prices, a buyer of an Apple straddle with a Friday expiry would start making money if the stock rose above $156.04 or fell below $144.46 on Friday.
For Alphabet, Google’s parent company, the 30-day implied volatility was recently at 36%, and an overlap implied a post-earnings move in the stock on Friday up to $5.77, or 5.4%, which is above the 12-quarter average of $5.43. said Amberson of ORATS. The stock has moved more than that five times in the day after the last 12 quarterly reports, according to FactSet, including after the last two.
And for Amazon, the 30-day implied volatility was 49.6%, and a straddle implied a move in the stock price after one-day earnings up to $8.82, or 7.9%, which is above the 12-quarter average of $7.07, Amberson said. The stock has moved more than that after three of the past 12 quarterly reports, FactSet said, with all three times recording double-digit percentage moves.
