The S&P 500’s record streak is being overshadowed by the underperformance of the Magnificent 7 stocks—Apple, Alphabet, Amazon, Meta, and Microsoft—who have remained largely flat while the index is up 2.4% this year. As these tech giants prepare to report earnings this week, options traders are betting on a potential shift in momentum. Notably, call options are trading at a premium compared to puts, with heightened activity observed across most of these stocks, except for Alphabet, which is seeing expectations for a significant price movement.
The implications for the broader market are substantial. If the Magnificent 7 can deliver strong earnings, it could catalyze further gains for the S&P 500. Alphabet’s options pricing suggests traders are anticipating volatility, with an implied move of 5.25%, while Meta’s historical performance indicates a potential upside that could exceed its implied 7% move.
Traders should exercise caution as they navigate these options markets, particularly given that volatility tends to decrease post-earnings. Understanding the balance between risk and reward will be crucial as earnings season unfolds.
Source: cnbc.com