Tech giants Alphabet and Microsoft are set to report earnings after the closing bell, putting the market's modest rebound rally to a key test. The two stocks present starkly different technical setups and options-market expectations.
Microsoft is trading less than 1% below the record closing high it set earlier this month, while Alphabet has fallen 20% from its May closing peak and is hovering on the edge of a technical bear market.
According to Cboe LiveVol data, market makers are pricing in a 5.8% post-earnings move for Alphabet, versus less than 5% for Microsoft. The implied earnings move for Microsoft is below the stock's average 6% earnings-season swing over the past two years. Alphabet, by contrast, has averaged just a 2.7% post-earnings move over the past two years, so this quarter's expected swing is more than double that. That is reasonable: the stock tumbled 7% after its previous quarterly report, and surged 10% after the report before that. Barchart data shows that, as the Nasdaq 100 pulled back, the put side of the put/call ratio for both stocks gradually climbed. Still, over the past year, calls have outnumbered puts on both names, with the ratio staying below 1.
Microsoft's current put/call ratio stands at 0.59, down from a June low of 0.43. Alphabet's ratio is now 0.72, its highest since August. But Tuesday's options flows sent a more constructive signal. Cboe data shows 435,000 options changed hands that day, of which 312,000 were calls. Among the calls, roughly 102,000 were likely buyer-initiated, versus just 54,000 seller-initiated, with the rest trading near the midpoint.
SpotGamma data shows that large call buying in Alphabet was concentrated in January-expiry contracts with a $360 strike. A single trader appeared to buy about $18.5 million of those calls across eight blocks of 2,850 contracts each.
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