Investors shouldn’t expect any extraordinary stock moves after Apple Inc., Amazon.com Inc. and Google parent Alphabet Inc. report earnings late Thursday, as options oddsmakers are expecting price reactions that are mostly below the longer-term averages.
The technology behemoths, which account for three of the four biggest U.S. companies by market capitalization, all report December-quarter results after the closing bell. Last quarter, shares of all three companies rallied the day after their results.
One way to gauge expected volatility in a stock is through an options strategy knows as a “straddle,” which involves the simultaneous buying of both bullish (calls) and bearish (puts) options, with at-the-money strike prices, expiring the next day. Straddles are pure volatility plays, meaning the direction of the stock doesn’t matter, only the size of the move. Straddle buyers only make money if the stock moves more than the pricing implies.
Through midday trade Thursday, straddles are pricing in one-day, post-earnings stock moves of 4.2% for Apple, 6.5% for Amazon and 4.8% for Alphabet.
After the past 20 quarterly reports, the average one-day move for Apple’s stock AAPL, +0.16% has been 4.6%, split between an average 4.8% gain for the 10 up days and 4.4% decline for the 10 down days, according to a MarketWatch analysis of FactSet data.
Apple shares rose 0.4% in midday trade. They have gained 0.7% over the past three months, while the Dow Jones Industrial Average DJIA, +0.11% has rallied 12%.
At the current price of $168.05, buying the straddle wouldn’t start making money until the stock rose above $176.25 or fell below $160.32.
Apple: EPS vs. consensus and stock reaction
For Amazon AMZN, -1.89% the average move was 7.5% over the same period, with the 11 up days averaging a 7.7% gain and the 9 down days averaging a 7.2% decline.
The stock fell 1.2% on Thursday ahead of the results, but have soared 30% over the past three months.
Amazon: EPS vs. consensus and stock reaction
The average post-earnings move for Alphabet shares GOOGL, -0.44% over the same period has been 4.6%, with an average 5.3% gain for the 14 up days and an average 2.9% decline for the 6 down days.
The stock shed 0.1% in midday trade, and has gained 14% the past three months.
Alphabet: EPS vs. consensus and stock reaction
The less-than-average moves priced for Apple and Amazon, and slightly outsized move for Alphabet, comes despite the fact that the CBOE Market Volatility Index VIX, -2.95% which measures expected volatility for S&P 500 index SPX, +0.02% options, has run up 15% year to date.
Source: marketwatch.com | Original Link
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