Alphabet and Microsoft are scheduled to report earnings after the bell, with options markets pricing significantly different risk expectations for the two tech giants [1]. Microsoft is trading less than one percent below its closing record reached earlier this month, while Alphabet is flirting with technical bear-market territory, down 20% from its closing high in May [1].
Market-makers are pricing a 5.8% implied move for Alphabet stock after its report, compared to under a 5% swing for Microsoft, according to Cboe LiveVol data [1]. For Microsoft, the implied move of under 5% is smaller than its 2-year average swing of 6%, suggesting relatively contained expectations [1]. In contrast, Alphabet's 5.8% implied move is more than double its 2-year average reaction of 2.7%, which arguably reflects the stock's recent volatility—it dropped 7% after last quarter's report and rallied 10% the report prior [1].
Options positioning reveals mixed sentiment across the two stocks. The put/call ratio for Microsoft stands at 0.59, up from a low of 0.43 in June, while Alphabet's put/call ratio is 0.72, the highest since August [1]. Both ratios remain below 1.0, indicating more calls than puts on a baseline level over the past year [1]. However, Tuesday's options flows cast a more positive light on Alphabet, with 312,000 of 435,000 options traded being calls, including almost 102,000 call trades likely initiated by buyers versus 54,000 by sellers [1]. Notably, some of the heaviest call-buying in Alphabet was at the 360-strike for January expiry, where a single trader appeared to buy around $18.5 million of calls across eight transactions of 2,850 contracts each [1].
CONCLUSION
Options markets are pricing substantially higher volatility expectations for Alphabet's earnings report relative to its historical average, reflecting recent stock weakness and earnings-driven swings, while Microsoft faces more muted implied moves despite trading near record highs. The significant call-buying activity in Alphabet, particularly at the 360-strike, suggests some traders are positioning for a potential upside move following the earnings report.