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Traders expect to see $53 billion in earnings moves from two tech giants

Jeff Bezos
Brent Lewis | The Denver Post | Getty Images
Jeff Bezos

Tech giants Alphabet and Amazon are set to report earnings after Thursday's bell, and traders expect to see some big-money moves on the events.

Options on Alphabet are implying that the stock will move $42 between now and the end of the week — a move of a bit more than 5 percent for the stock. Meanwhile, Amazon options are implying that the stock will move about $53 by Friday — a roughly 6.5 percent move.

Since Google parent Alphabet is a roughly $550 billion company, and Amazon is worth about $390 billion, these moves are $28 billion and $25 billion, respectively.

Of course, the stocks could end up collectively moving much more, or less, than these numbers suggest. However, $53 billion appears to be the market's best guess.

These expected earnings moves are derived from the price of buying both a bullish call option and a bearish put option on the stock. If one expects Alphabet to move more than 5 percent, that trader could express this thesis by buying a call and a put that each have striking prices in line with the stock's current level. Since this trade grants exposure to the stock's upside and downside, and will set the trader back 5 percent of the price of the stock, a move of greater than 5 percent in either direction will make this trade a winner.

Conversely, a trader who thinks that Alphabet will move less than 5 percent can do the opposite, selling both a put and a call.

As a market is made between these two groups, the options prices will converge on consensus expectations of the stock's post-earnings move.

And right now, the market is expecting these two giants to collectively gain or lose an amount roughly equivalent to the market value of Netflix or of Caterpillar.


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