Options Market Gears Up for Highly Anticipated FAANG Earnings

Alphabet is due to report earnings after the close tonight

Managing Editor
Feb 3, 2020 at 12:40 PM
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FAANG stock Alphabet Inc (NASDAQ:GOOGL) is moving 2.8% higher today, last seen at $1,472.53, as Wall Street gears up for the company's highly anticipated earnings report, due out after the close today. Below we will take a look at how GOOGL has been faring on the charts, and what the options market is pricing in for post-earnings moves.

Long-term, Alphabet stock has been climbing higher, with a consistent layer of support at the 40-day moving average. However, in recent weeks the equity has struggled, with its pullbacks quickly contained at the 20-day moving average. Most notably, the tech giant landed on our list of 25 stocks to avoid in the first quarter, despite its year-over-year lead of 31%.

Daily GOOGL with 20 and 40MA

In the options pits, call traders have been flocking to the security. Specifically, Alaphabet stock sports a 10-day call/put volume ratio of 1.93 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ranks in the 93rd percentile of its annual range, meaning calls have been purchased over puts at a faster-than-usual clip in recent weeks.

Digging into Alphabet's earnings history, the stock has closed lower the day after reporting in five of the past eight quarters. During this time frame, Alphabet stock has averaged a 4.5% swing, regardless of direction. This time around, the options market is estimating a larger-than-usual, 8.8% move for Tuesday's trading.

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