Let’s get ready.
Wednesday night is the main event of earnings season, when the “Magnificent Seven” companies – Alphabet, Amazon, Meta and Microsoft – are scheduled to report. Options traders are pricing in more than $800 billion in market capitalization changes after the bell.
If option prices are any indicator, it’s going to be an even more volatile night than we’ve seen over the past year. The current implied move is above the fourth quarter average for three of the four names.
Meta is an exception, with options pricing in a 7.3% price move compared to the annual average of 9.3%. That’s despite the fact that the meta has outperformed the implied move after the last three reports.
Meanwhile, Google’s parent company Alphabet has a history of making small moves below option prices, and traders appear poised for repeat disappointment. Options account for nearly 6% of stock price fluctuations, but the average for the fourth quarter was less than 1.5%.
In terms of directional bias, options flows remain bullish, with call volume and premiums exceeding puts for all four stocks, indicating that flows are in greater demand for upside exposure than shorts.
Amazon in particular saw an influx of bullish options on Wednesday morning, with several large call buyers spending more than $500,000 to gain price appreciation exposure. One trader spent $616,000 buying 581 of the 260-strike in-the-money calls expiring next Friday, and another trader bought 299 of the 265-strike calls in anticipation of the Sept. 18 expiration and just used up his money on a $731,000 trade.
Microsoft, the laggard of the group, also saw a strong bullish trend in its 450 strike calls expiring in mid-June, with the entire contract trading for about $3 million early in the session.
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