Yesterday we previewed several notable earnings in Alphabet (GOOGL), Starbucks (SBUX) and Boeing (BA) and detailed some spread trades in Boeing. With all the earnings out and the moves in, let's circle back and check on what happened versus expectations, and look at the side by side performance of the strategies in BA:
Moves vs 2 week Expectations
From OptionsAi technology:
Google today +9%, options were underpriced. Updated 2 week expected move +/-4%.
Starbucks today, -0.70%, options were overpriced. Updated 2 week expected move +/-5.2%.
Boeing today, +4.4%, options were overpriced (so far). Updated 2 week expected move +/-10%.
In the case of GOOGL it's obvious that the options market got it wrong, and what's interesting is it has the biggest decline in its updated expected move (from the post earnings implied volatility crush). Starbucks options had it wrong the other way with a tiny earnings move. Both Boeing and Starbucks options saw a much smaller decline in volatility than GOOGL after earnings which may partially answer the question on whether options are pricing earnings moves or market moves. The answer may be that it's shifting by sectors.
Follow Up on Ways to Play
We used a bullish target in BA to demonstrate various bullish earnings strategies, let's check back in to see how they performed vs eachother:
The 3 options trades generated by OptionsAI technology:
- The outright call, originally $1,038 is now $1,325, a gain of 27%
- The debit call spread, originally $578 is now $787, a gain of 36%
- The credit put spread, originally $525 is now $290, a 45% gain, but versus risk of $875 a return of 26%.
This is a very good demonstration of the differences between the 3 most common ways to play on a bullish price target, and using the expected move to your advantage. For comparison, the May 15th 145 call, about 25 deltas into the event, is up only 16% on this move higher, despite vol not a heck of a lot lower afterwards.
From OptionsAI technology, updated trade metrics for the credit put spread:
Give OptionsAI technology a try with your own price target in AAPL HERE