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Jul 25, 2022

FAANG Earnings Week Ahead: Apple, Amazon, Google, Meta, Microsoft

By:Mike Butler

Earnings Explorer week of July 25

Last week brought quite a stir in the market – Monday through Thursday we saw great strength in the NASDAQ and S&P 500, with strong earnings moves in TSLA and NFLX – with the S&P 500 market down 55 points on Friday and so many big names reporting earnings this week, I’d be surprised if we did not see some big market moves! Let us look at an earnings preview for this week below.


Number 1 icon

 Apple

AAPL – reporting Thursday the 28th AMC (after market close) - 6 pt. weekly expected move - 4% of the stock price

AAPL has sold off quite aggressively over the past few months, but surprisingly it has the lowest expected move relative to the stock price compared to the other big-name stocks reporting this week. Outside of the weekly cycle implied volatility, AUG & SEP are both flatlining around the same level of 33% - I’m looking at calendar and diagonal spreads to take advantage of the near-term high IV% in the short-term cycle, without paying for much of an IV% contraction in AUG/SEP. The short option will have one day to expiration if the trade is placed on Thursday as well, so this is my second favorite trade for the week!

Number 2 icon

 Microsoft

    MSFT – reporting Tuesday the 26th AMC – 12 pt. weekly expected move - 4.5% of the stock price

    MSFT is a mirror image of AAPL’s IV% structure, with a slightly higher IV% in AUG/SEP. I am still looking at the same strategies in MSFT with flatlined IV% in the back months. Calendar & Diagonal setups on Options Trading Concepts Live on Tuesday at 11 am CST!

    Number 3 icon

     Amazon

      AMZN - reporting Thursday the 28th AMC – 8 pt. weekly expected move - 6.5% of the stock price

      AMZN did not see the post-split rally many had hoped for, and now the expected move for earnings is still relatively low compared to the stock price. 50% IV around the AUG/SEP cycle is higher than the previous stocks covered, but these figures are still relatively low compared to the LEAP expiration cycles of 45%. This is another Thursday announcement, which sets up well for aggressive IV crush weekly short options trades like diagonal spreads, calendar spreads, ratio spreads, broken wing butterflies etc.

      Number 4 icon

       Alphabet

        GOOGL – reporting Tuesday the 26th AMC – 7 pts. weekly expected move - 6% of the stock price

        GOOGL’s stock price finally split, so now we’re looking at a much more affordable $107 stock price! Still, low IV% here mimics a similar environment as AMZN – This is the weakest setup of the group, with low IV% and a Tuesday announcement, where weekly options may not decay as aggressively as Thursday announcement options will.

        Number 5 icon

         Meta

          META – reporting Wednesday the 27th AMC – 19 pt. weekly expected move - 11% of the stock price

          This is the largest expected move of the bunch, and calendar spreads set up in an interesting way – the IV% structure is similar to NFLX in the sense that a SEP OTM option cost basis can be reduced by upwards of 30% for many strikes by selling the weekly option against it. I am looking at a double OTM calendar spread personally, but I’ll do a deep dive on OTC Live on Wednesday!


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