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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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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