(Bloomberg) -- Options markets are pricing earnings-day moves for tech giants reporting this week that are largely in line with past swings, with investors showing limited demand for protection against selloffs.
Of the five major technology firms reporting earnings — Apple Inc., Microsoft Corp., Amazon.com Inc., Meta Platforms Inc. and Alphabet Inc. — only Meta is showing a large difference between what options are implying and the past moves. Meta has jumped more than 20% twice and dropped as much as 25% over the past eight releases, so even a 7% implied move pales in comparison.
“We see options-implied moves for earnings across Big Tech names roughly in line with historical averages,” said Celine Zhao, head of US equity research at Optiver. “However we have not seen much of an increase in skew for these names, suggesting limited demand for downside protection around earnings. This could be due to fewer fears around market concentration, capex spending or valuations, compared with the last two quarters.”
Investors will be closely watching the results and outlooks from the companies, which together represent more than 20% weighting in the S&P 500 index, after the stellar earnings reported by technology firms earlier in the year. The earnings will be followed next week by the closely contested US presidential election and Federal Reserve meeting, piling up a slew of potentially market-moving events for investors to protect against.
Breaking it down a bit further, in five of the past eight quarters Apple’s options implied a larger swing than was actually realized, while Microsoft options were more expensive in six of eight. On the other hand, Meta’s swings have outpaced the implied moves more than half the time, sometimes by more than 10 percentage points.
Although Nvidia Corp. doesn’t report this week, investors will be watching capital spending outlooks closely, as four of the companies account for a large chunk of the chipmaker’s sales. Near-term Nvidia option volatility edged higher on Monday.
The broader technology sector appears relatively inexpensive with earnings and the US election approaching, according to Goldman Sachs’ derivatives sales trading desk, which sees Invesco QQQ Trust Series 1 ETF (ticker QQQ) calls cheap relative to SPDR S&P 500 ETF trust (ticker SPY).
--With assistance from Natalia Kniazhevich.
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