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Options traders took contrasting views on Alphabet as the hyperscaler gets set to report earnings after the close.
Current options prices are implying a nearly 6% move, well about its eight quarter median move of 2.6%. Traders were decidedly bullish heading into the first. Just before noon, a trader bought 2271 contracts of the 350/365 call spread for about $4.4. The trade target a move higher to $365, a 13% jump from its current price. The trade is a bet the in the near term, the worst is behind Alphabet, which has seen its shares fall nearly 20% from its all time highs reached back in May.
Some traders are taking a different tact into the print. Specifically, a separate trader put on a bearish 3x1 put diagonal, collected $1.9M by selling 9,000 of the Nov. 20 expiration 290-strike puts at $4.15 per contract while buying 3,000 of the Jan. 15, 2027 exp. 300-strike puts at $2.15 per contract for a total debit of $2.5M
This is a trade that looks to take advantage of high near-term volatility in Alphabet's shorter dated puts. The goal is for those short-dated puts to expire worthless, with the trader then long the 300-strike puts, looking for a 9% move lower through mid January.
The market's mini rally faces a key test after the bell when tech giants Alphabet and Microsoft report. The technical set-up and options expectations could not be more different.
Microsoft is less than one percent below its closing record reached earlier this month, while Alphabet is flirting with technical bear-market territory, off 20% from its closing high in May. Market-makers are pricing a 5.8% move for Alphabet stock after its report, compared to under a 5% swing for Microsoft, Cboe LiveVol data show.
For Microsoft, it's a smaller implied move than its 2-year average swing of 6%. For Alphabet, which has averaged a 2.7% reaction over that time period, it's more than double – which arguably makes sense considering the shares dropped 7% after last quarter's report and rallied 10% the report prior.
The ratio of puts to calls on both stocks has been gradually building up on the put side as the Nasdaq 100 Index pulled back, but the metric's baseline for both shows more calls than puts the past year, with a ratio consistently under 1, according to Barchart data. In Microsoft, the ratio is currently 0.59, up from a low of 0.43 in June.
Microsoft, 1 year
In Alphabet, the ratio is 0.72, the highest since August, but Tuesday's options flows cast a more positive light. Of the 435,000 options traded, 312,00 were calls, with almost 102,000 call trades likely initiated by buyers, versus just 54,000 by sellers and the remaining near the mid-price, Cboe data show.
Some of the heaviest call-buying in Alphabet was at the 360-strike for January expiry, where it looked like a single trader bought around $18.5 million of calls across eight transactions of 2,850 contracts each, SpotGamma data show.
Alphabet, 1 year
