How to use the performance period for options trading
Implicit changes in options are the magnitude of price changes expected by the market on a stock's performance date. Market traders can infer the value of an option by referring to implied changes. Furthermore, by reviewing the stock's past stock price performance on the performance date, it is also possible to determine its specific trading pattern or rise or fall situation.
Volatility options strategies
When options are overvalued, arbitrage can be carried out based on short-term fluctuations in IV Crush if the stock price is still within the expected range. Common short-term volatility strategies include the Iron Eagle strategy, the sell cross strategy, and the sell wide span strategy.
Results release date: May 2 after the market
Performance forecast: FY2024 Q2 revenue of US$90.614 billion, a year-on-year decrease of 4.45%; earnings per share of US$1.49, a year-on-year decrease of 1.72%
Apple's current implied change is ± 4.2%, which is slightly higher than the historical average. Backtesting the stock's performance over the past 12 performance days, the probability of the stock's rise and fall was roughly the same. Among them, the most volatile closing report was +7.6%. The first four quarters closed at +4.7%, -4.8%, +0.6%, and -0.5%, respectively.
Looking at the volatility bias of options, it was found that market sentiment is bullish on Apple. Calls due this Friday with an exercise price of $170/175/180 have been snatched up one after another. There are still 28,000, 23,000, and 31,000 unclosed positions, respectively.
The Bank of America bucked the trend and sang for Apple before the results, and listed it as the preferred stock for 2024. Apple is scheduled to release its second-quarter earnings report next week. Bank of America is generally optimistic about Apple's prospects, believing that “service revenue growth and profit margins will remain strong.” However, Bank of America warned that “the demand environment is weak, and the downward guidance may affect the correction of stock prices.” However, given Apple's “rich catalyst path and defensive cash flow,” he rated the stock as a “buy” with a target price of $225.
2,$Advanced Micro Devices (AMD.US)$
Results release date: April 30
Performance forecast: Q1 revenue of US$5.452 billion, up 1.85% year on year; earnings per share of $0.17, turning a year-on-year loss into a profit
AMD's current implied change is ± 8.6%, which is slightly higher than the historical average. Backtesting the stock's performance over the past 12 performance days, the probability of the stock falling was high, 58%. The biggest increase was +12.6%, and the biggest decline was -13.9%; it closed up only once in the first four quarters, closing at -9.2%, -7.0%, +9.7%, and -2.5%, respectively.
Inquiring about the volatility bias of options, it was found that market sentiment is bullish on AMD. Calls due this Friday with an exercise price of $170 and $160 were the most popular, with sales volumes of 18,000 and 11,000, respectively.
Results release date: April 30
Performance forecast: Q1 revenue of US$142,541 billion, up 11.92% year on year; earnings per share of US$0.83, up 166.97% year on year
Amazon's current implied change is ± 7.6%, which is slightly higher than the historical average. Backtesting the stock's performance over the past 12 performance days, there is a high probability that the stock will fall; however, it has performed well in the last four quarters. Of these, three have closed sharply higher, and the three have closed at +8.3%, +6.8%, and +7.9%, respectively.
Looking at the volatility bias of options, it was found that market sentiment is bearish on Amazon. However, the options chain shows a very different landscape. Amazon is very active in call transactions that expire this Friday and exercise the right price of $180-200. Most single call buyers are betting that the stock price will rise during the earnings week.
UBS believes that investors' attention will no longer be limited to Amazon's cloud business AWS, but will expand to the company's overall franchise revenue and operating income, especially considering that business growth has already broken through the trough of the second and third quarters of last year. The market anticipates that Amazon's quarterly revenue will reach high-end expectations of 142.5 billion US dollars, operating revenue will be between 13 billion and 13.5 billion US dollars, and the growth of the cloud business is expected to reach 15% to 16%.
4.$Super Micro Computer (SMCI.US)$
Results release date: April 30
Performance forecast: FY2024 Q3 revenue of US$3,927 billion, up 206.04% year on year; earnings per share of US$5.46, up 256.86% year on year
Ultramicrocomputer's current implied change is ± 14.7%. Compared with previous results, stock price fluctuations are expected to increase. Backtesting the stock's performance over the past 12 performance days, the probability of the stock rising was high, about 75%. The higher increases were +31.2% and +28.3%, both after the release of the 2022 and 2023 quarterly reports; however, several recent stock price fluctuations have slowed down, and the biggest decline was -23.4%, which occurred when the 2023 second quarterly report was released.
How to easily enjoy the performance period? Futu Options tools help you!
>>Make good use of volatility analysis to determine the level of option valuation!
>>Options calculator to calculate the theoretical price of future options
Disclaimers
This content does not constitute an offer, solicitation, recommendation, opinion or guarantee of any securities, financial products or instruments. The risk of losing money when trading options can be extremely high. In some cases, you may lose more than the amount of your initial deposit. Even if you set backup instructions, such as “stop corrosion” or “limit price” instructions, you may not be able to avoid losses. Market conditions may make such instructions unenforceable. You may be asked to deposit an additional security deposit within a short period of time. If you fail to provide the required amount within the specified time, your open positions may be closed. However, you are still responsible for any shortfall in your account as a result. Therefore, you should study and understand options before trading, and carefully consider whether this type of trading is suitable for you based on your financial situation and investment goals. If you trade options, you should be familiar with the procedures for exercising options and when they expire, as well as your rights and responsibilities when you exercise options and when they expire.
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