MW Cheap options suggest a big post-earnings swing next week for these tech titans
By Lawrence G. McMillan
Wall Street is underestimating a potential price explosion in next week's tech-stock reports
The S&P 500 is in an overbought condition, but that's not necessarily a sell signal.
Earnings reports next week are led by some of the largest tech companies: Apple $(AAPL)$, Amazon.com (AMZN), Alphabet $(GOOG)$ $(GOOGL)$, Meta Platforms (META), Microsoft $(MSFT)$ and Qualcomm $(QCOM)$. The earnings surprises we look for have a particular pattern of implied volatility heading into the reporting dates.
The Microsoft two-year chart below, for example, has two graphs on it. It shows the stock price on the bottom and implied volatility on the upper graph. One can see that implied volatility increases into a spike and then plunges, creating a sawtooth pattern.
These implied volatility increases occur as the earnings date approaches. Then implied volatility plunges after the earnings are announced. It is actually something of an optical illusion, for the options are not getting more expensive in terms of price as the earnings date approaches, but they are remaining the same price. That is, the option trading "universe" prices the straddle prior to the earnings and more or less keeps it at that price until the earnings are announced.
An option that doesn't lose value to time decay (which these don't over the couple of weeks heading into the earnings) thus has the appearance of increasing implied volatility.
The table below shows eight well-known stocks reporting earnings next week. This list normally is comprised of stocks whose options have increased implied volatility. That is, the option market is expecting a potentially volatile move after the earnings news.
Our approach is to attempt to buy the shortest-term straddle possible (generally the one expiring on the Friday after the earnings reporting date) and to exit at the close of the first full day of trading after the earnings have been reported. For the stock listed in this table, that would mean buying the straddles expiring on May 1.
Specifically, the columns below (from left to right) are:
Date: The earnings reporting date
PM?: Whether the earnings are to be reported before the market opens ("N") or after the market closes ("Y")
Symbol: The stock symbol
Needed: The most that we would pay for that near-term straddle, with the price of the straddle expressed as a percentage of the underlying stock price. In reality, this is the percentage move that is smaller than six of the past ten post-earnings moves in this stock.
OptVol: The 20-day average of total option volume on this stock. Low numbers here indicate a potentially illiquid situation.
Date PM? Symbol Needed OptVol 4/29/26 Y AMZN 6.18% 629,381 4/29/26 Y CMG 4.49% 27,856 4/29/26 Y CVNA 12.09% 35,586 4/29/26 Y GOOG 2.92% 338,013 4/29/26 Y META 4.82% 595,103 4/29/26 Y MSFT 3.06% 645,473 4/29/26 Y QCOM 5.83% 29,912 4/30/26 Y AAPL 0.66% 833.021
Points to note: First, Apple shares typically don't move much after its earnings report - possibly because the analysts who follow the company have been highly accurate with their earnings estimates, so the actual earnings have not produced much of a surprise. The Apple (May 1) 275 straddle, which is the at-the-money straddle, recently sold for for 0.89% of the stock price. So once again, it doesn't appear that AAPL will post much of a move.
Some of the others on this list could fare differently. Several offer May 1 straddles that are priced just above the "needed" threshold. Meta Platforms is the cheapest right now, but all of these stocks could be candidates next week, as straddle prices sometimes decline just prior to the earnings release. The Meta straddle may be something of an optical illusion, though, since five of the past 10 earnings reports have seen the stock move 10% or more, but the other five have an average move of less than 4%.
S&P 500 is overbought, but it's no time to sell
The S&P 500 Index SPX is overbought - and as such seems to be especially subject to even the slightest news regarding Iran. The huge rally that has taken place - more than 800 points in just 13 trading days, accounts for this overbought condition and adds to volatility.
SPX remains above its +4<SIGMA> "modified Bollinger band" (mBB). That's an overbought condition, but not necessarily a sell signal. If there is to be a sell signal, the first step would be the SPX closing below the +3<SIGMA> Band, currently at 7,000 and rising rapidly. That would be a classic sell signal, but we don't trade those. Rather, we would require further downside in order to produce a full-fledged MVB sell signal.
Equity-only put-call ratios remain on buy signals for the stock market, since they are dropping rapidly. The increase in the rate of buying of calls on individual stocks has been substantial. These ratios will remain bullish for stocks until they roll over and begin to rise.
Market breadth has been modestly positive, so the breadth oscillators remain on buy signals. Over the past week, all of the cumulative breadth measures made new all-time highs. This is normally a very good sign for the market - indicating that the advance is broad.
New highs continue to outpace new lows on the NYSE, which is bullish. This indicator will remain bullish until new lows outnumber new highs on the NYSE for two consecutive days.
VIX VIX remains the "worry-wart" of the indicators. It closed above its 200-day moving average on Wednesday for the third day in a row. That means the trend of a VIX sell signal is back in place. It's not surprising that VIX is high (which reflects an urgent demand for SPX puts), with the potential problems from Iran and oil. Typically with SPX at all-time highs, we would see VIX in the 14 to 15 area. The fact that it is considerably higher reflects the nervousness in this market.
The construct of volatility derivatives remains modestly bullish for stocks, though. The term structures of the VIX futures and of the Cboe volatility indices are sloping upwards. Moreover, the VIX futures are trading at a premium to VIX. The front-month VIX futures contract is now May, since April has expired.
SPX continues to be buoyed by traders playing "catch-up" after having missed the swift upward turn in the market. There are plenty of overbought conditions, but only one sell signal in place. We will add new positions only on confirmed signals. Continue to roll calls up to higher strikes where warranted.
New recommendation: BorgWarner
There is a new weighted put-call ratio buy signal in BorgWarner $(BWA)$. The stock spurted to new all-time highs in February after a strong earnings report. When the stock backed down from there, though, put buying was rampant. The situation quickly became one of heavy pessimism, as the weighted put-call ratio rose to nearly 300 (meaning $300 worth of puts were being bought for every $100 worth of calls - an extreme reading).
Since then, put buying has peaked and the put-call ratio has fallen, which generates the current buy signal. A year ago, in April 2025, put buying was also heavy and at that time the weight ratio also reached over 300. From there, a strong rally followed, as pessimism waned and the stock moved higher.
Buy 3 BWA (May 15) 55 calls at a price of $3.30 or less.
New recommendation: Straddle buy in Bank of Nova Scotia
Bank of Nova Scotia's $(BNS)$ September options are trading with a low enough implied volatility, compared with both realized volatility and historical patterns of implied volatility, that one can consider a straddle buy here. The stock is fairly volatile, as can be seen from the accompanying chart. We are attempting to buy the straddle for 81/2 points, and the stock has been able to move that distance with ease many times in the past year.
Buy 1 BNS (Sep. 18) 75 call and buy 1 BNS (Sep. 18) 75 put, for a combined price of $8.50 or less.
If the straddle is bought, then we would roll the calls up to the 85 strike if BNS trades at $85. Similarly, we would roll the puts down to the 65 strike if BNS trades at $65.
Follow-up actions:
All stops are mental closing stops unless otherwise noted.
We are using a standard rolling procedure for our SPY SPY spreads: In any vertical bull or bear spread, if the underlying hits the short strike, then roll the entire spread. That would be roll up in the case of a call bull spread or roll down in the case of a bear put spread. Stay in the same expiration and keep the distance between the strikes the same unless otherwise instructed.
For outright long options, roll if they become 8 points in-the-money.
Long 1 TSEM (May 15) 220 call and short 1 TSEM (May 15) 235 call: The position was rolled up again on April 17 when TSEM $(TSEM)$ traded above $220. Roll up and out both sides, 15 points each, if TSEM trades at $235.
Long 1 BKR $(BKR)$ (July 17) 65 call and long 1 BKR (Jul7 17) 60 put: Roll the call up at $75 and roll the put down at $45.
Long 2 ARKK (May 15) 78 calls: We will hold the calls as long as the weighted put-call ratio for ARKK ARKK remains on a buy signal.
Long 1 SFL (Aug. 21) 10 straddle: Roll the calls up if SFL $(SFL)$ trades at $13, and roll the puts down if SFL trades at $7.
Long 1 SPY (May 15) 705 call and short 1 SPY (May 15) 720 call: This is based on the "new highs vs. new lows" buy signal. The spread was rolled up when SPY traded at $705 on April 17. This will remain in force until new lows outnumber new highs on the NYSE for two consecutive days.
Long 1 SPY (May 15) 705 call and short 1 SPY (May 15) 720 call: This position is based on the equity-only put-call ratio buy signals. They will remain in place until the ratios bottom out and begin to trend higher. The spread was rolled up when SPY traded at $705 on April 17.
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April 23, 2026 15:42 ET (19:42 GMT)
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