The options market is bracing for a bigger-than-usual price move the day after a $3 trillion company reports quarterly earnings.
This is due to the implied volatility of Apple Inc. AAPL’s stock price, or how much the stock is expected to move over a period of time.
Alphabet Inc. GOOGL,
and Amazon.com Inc. AMZN,
Even the implied volatility of the S&P 500 index SPX remains elevated.
It fell to a 13-month low.
The three tech giants are set to report earnings for the quarter through December after Thursday’s closing bell.
See earnings previews for Apple, Alphabet, and Amazon.
For Apple, an options strategy known as “straddle” recently hit $5.79 after a day’s close, or the current price, according to data provided by Matt Amberson, principal at Options Research & Technology Services. was priced at a 3.9% move in This is slightly above the 12-quarter average of $5.76 (3.8%).
According to FactSet data, the stock has moved more than 3.9% the day after its earnings announcement four times in the last 12 quarters, most recently after its last quarterly report.
A “straddle” is a pure volatility play involving the simultaneous purchase of a strong option (call) and a bearish option (put) with the same at-the-money strike or current price target and the same expiration date. Use the. Straddle buyers make a profit if the stock price moves beyond the implied expected range in either direction. Read more about straddles.
The expected range is determined by the stock’s implied volatility and the time until the option expires. For Apple, the recent 30-day implied volatility was 29.7%. This compares to the Cboe Volatility Index VIX,
Known as the VIX, it fell to 17.58% in Thursday morning trading, its lowest level since mid-January 2022.
VIX represents the 30-day expected volatility of 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 goes down, and fall when the market goes up.
Based on current prices, buyers of Apple, which matures on Friday, will start making a profit if the stock rises above $156.04 or falls below $144.46 on Friday.
For Google parent Alphabet, recent 30-day implied volatility was 36%, with straddles pointing to share price movements after Friday’s earnings results of 5.77, above the 12-quarter average of $5.43. dollars or 5.4%. ORATS’ Amberson said: In the days following his last 12 quarterly reports, the stock has moved more than five times, according to FactSet, including the last two.
And Amazon’s 30-day implied volatility was 49.6%, with straddles implying a one-day post-earnings move of $8.82 (7.9%), above its 12-quarter average of $7.07, Amberson said. says Mr. According to FactSet, in three of his last 12 quarterly reports, the stock has fluctuated more than that, and in all three he recorded double-digit percentage fluctuations.
