Option Witch | AppLovin Is Expected to Show a 15% Swing Post-Earnings! Two High-Volatility Strategies in Focus

Mobile app advertising platform $AppLovin(APP)$ will be reporting results after market hours on Wednesday. Option traders are pricing in a potential move of 15.5% in either direction following the earnings release. Investors may consider high-volatility options plays like straddles and strangles.

Things to Watch in AppLovin’s Q2 Earnings

This quarter, analysts are expecting AppLovin’s revenue to grow 18% year on year to $1.27 billion, slowing from the 44% increase it recorded in the same quarter last year. Adjusted earnings are expected to come in at $2.32 per share.

However, don't panic about the apparent decline in revenue growth, as the Apps business (which represented around 32% of total revenue in FY 2024 and 22% in Q1 2025) is no longer considered.

The company’s advertising platform registered a remarkable revenue increase of 71% over Q1 2025, totaling $1.16 billion, and this momentum could persist into Q2. Profit is projected to be around $2.32 per share for the quarter, based on consensus estimates, while revenues are expected to be approximately $1.22 billion, reflecting a 13% increase compared to last year.

The majority of analysts covering the company have reconfirmed their estimates over the last 30 days, suggesting they anticipate the business to stay the course heading into earnings. AppLovin has only missed Wall Street’s revenue estimates once over the last two years, exceeding top-line expectations by 5.2% on average.

Options Traders Anticipate a 15% Move

The expected move for APP options expiring on Aug 08, 2025 (2 days) (w) is ±$59.44 (15.5%), with a price range of $323.92 - $442.79.

Source: OptionCharts

Call open interest expiring this Friday totals 29,023, while puts stand at 17,669 — indicating bullish tilt among options traders.

Source: OptionCharts

Open interest for $410 and $420 calls expiring this week are particularly high, with 4,411 and 3,360 unclosed contracts as of Tuesday.

$APP 20250808 410.0 CALL$

$APP 20250808 420.0 CALL$

Source: OptionCharts

Option Strategy

1. Straddle (ATM Options)

Example: August 8 Expiry, Strike $380

• Call: $31.15 (mid-price)

• Put: $31.85 (mid-price)

• Total Cost: ~$63 per straddle

$APP Straddle 250808 380.0C/380.0P$

Breakeven:

• Upside: $380 + $63 = $443

• Downside: $380 – $63 = $317

Rationale:

• Targets a ±16.7% move from current price.

• High IV justifies premium but risks "IV crush" post-earnings.

• Historical support/resistance: $344 (support), $525 (52-week high).

Source: Tiger Trade App

2. Strangle (OTM Options)

Example: August 8 Expiry

• Call: $400 strike @ $20.75

• Put: $360 strike @ $20.45

• Total Cost: ~$41.2 per strangle

  $APP Strangle 250808 360.0P/400.0C$

Breakeven:

• Upside: $400 + $41.2 = $441.2

• Downside: $360 – $41.2 = $318.8

Rationale:

• Requires ±10.4% move for profitability.

• Lower upfront cost reduces risk if move is muted.

• Aligns with technical levels: $360 (recent low), $400 (psychological resistance).

  Source: Tiger Trade App

Critical Risk Factors

1. IV Crush: Post-earnings IV could drop 30–50%, eroding option premiums.

2. Earnings Surprise Sensitivity:

   • Bull Case: Beat on AI-driven ad revenue growth could trigger short squeeze (34.8M shares short).

   • Bear Case: Soft guidance may validate bearish bets, targeting $344 support.

3. Liquidity: Focus on strikes with high open interest (e.g., $380 call: 1,384 contracts).

Recommendation

• Aggressive Traders: Use straddles to capitalize on extreme volatility.

• Risk-Averse Traders : Use strangles to limit premium exposure.

• Post-Earnings Play : Monitor IV crush for potential credit spreads.