To The Moon

Impacted by last week's plunge, tech earnings this week, even with robust numbers, may not see significant rallies and could potentially decline further. As a result, large options orders for tech stocks appear to have turned quite conservative, with institutions starting to employ in-the-money option combinations to reduce costs and control risks. This reflects the market's skepticism about the sustainability of the current market rebound.

$Meta Platforms, Inc.(META)$
I believe META will remain the strongest performer this earnings season due to its monopolistic advantages. However, expectations should not be set too high, as the previous sell-off has made $525 a minor resistance level, making a repeat of last quarter's 20% surge unrealistic. No decline would already be satisfactory, as the annualized return for selling at-the-money puts this week reaches 355%.

Nevertheless, for a more conservative approach, the at-the-money put selling strategy will not be adopted this time. Institutional option trades show they are buying the $META 20240621 475.0 CALL$  and selling the $META 20240621 550.0 CALL$  combination. Based on the strike prices, the expected gain is capped at around 5%. For put selling, the $META 20240503 475.0 PUT$  with a $475 strike can be considered.

$Microsoft(MSFT)$
The expected volatility is similar to META at 4.7%. However, institutional option orders for MSFT appear even more conservative, with the purchase of an in-the-money straddle: $MSFT 20240517 380.0 CALL$  and $MSFT 20240517 380.0 PUT$ .

The advantage of this approximately 5% in-the-money straddle is that the call option's value primarily consists of intrinsic value, better able to withstand downside volatility. The put option, though lacking intrinsic value, can partially offset losses during a decline. Furthermore, since the strike is out-of-the-money, the put option is cheaper, effectively serving as an inexpensive insurance. For this combination, as long as MSFT's post-earnings price exceeds $412, it will break even, equivalent to a 1.2% gain.

There is also a similar in-the-money straddle for the May 10th expiry: $MSFT 20240510 350.0 CALL$  and $MSFT 20240510 350.0 PUT$ . However, I believe that instead of being so conservative, it might be better to simply sell the $MSFT 20240510 350.0 PUT$ , as the $360 level is a relatively strong support, and the stock price is unlikely to breach it.

$Alphabet(GOOG)$
A glance at the GOOGL options suggests mostly retail participation, making the data less valuable as a reference. However, the $GOOG option orders reveal a relatively bullish stance: institutions are buying the $GOOG 20240621 165.0 CALL$  and selling the $GOOG 20240621 135.0 PUT$ . Based on the strike prices, the expected gain is around 3.7%, which is not high but at least the call strike is out-of-the-money.

Google has multiple strong support levels below, such as $154, $142, and $133. By choosing $135 as the put strike for selling, institutions signal their willingness to build positions at that level. A conservative strategy could be to simply sell the $GOOG 20240621 135.0 PUT$ .

Overall, the market's expectations for this week's major tech earnings appear relatively neutral, with institutions adopting more risk-controlling strategies.