Facebook options suggest great movement in action
Facebook options suggest great movement in action
Investors in stock chopped by volatility this earnings season are betting that the tumult in technological actions to be continue.
and Alibaba Group Holding Ltd., when companies publish their quarterly results this week.
Option prices predicted a 8.2% rise in Facebook shares in the days after the social media company published its earnings on Tuesday after market close, according to Trade Alert data released through Friday. That's a lot bigger than the average 5.5% move that Facebook has posted after its last eight quarterly launches, according to Trade Alert options data.
Facebook investors have already suffered. this year as multiple controversies and fears about the slowdown in growth have affected the company. Its shares have plummeted almost 20% in 2018, on the way to its first descending year.
The fall of Facebook shares is part of a larger shift in investor sentiment toward technology. After having been the valued sector for years, technology names have entered the market in general several times in 2018. Last week, they dragged reference indexes to negative territory for the year. The Nasdaq technology compound fell 3.8% last week to enter a correction, while the S & P 500 benchmark fell 3.9%.
"The impulse that made everything go up," said Jeffrey Pavlik, chief investment officer at Pavlik Capital Management, which oversees options strategies.
Investors are also projecting a 6.5% move in a day after Apple's earnings report on Thursday, which compares to the 3.8% variation of the iPhone maker in the last eight quarters. Investors also see an 8% increase in US listed shares of Alibaba Group Holding Ltd. after its report this week, compared to the 3% average move, according to Trade Alert data on Friday.
The estimates do not indicate which direction the actions can influence, only the magnitude of the movement. The percentages are derived from an options trade known as straddle, which involves the purchase of both bullish and bearish contracts that can be exercised at the same price for the shares.
Some projections made by the options market have already come true to a large extent. On Thursday afternoon, options investors traded at 6.1%.
Amazon.com
Inc.
shares, well above the historical average of 4.3%. The company reported record gains after the market close on Thursday, but also saw a slowdown in revenue growth. Their shares sank 7.8% on Friday.
Similary,
Goldman Sachs Group
Inc.
Analysts wrote in a note on Thursday that investors seemed concerned about the Google matrix
Alphabet
From Inc.
ahead of its quarterly earnings publication. Analysts wrote that traders were paying more for bearish options in relation to bullish options in the company's stock.
Alphabet reported earnings increased but in a slightly slower growth in revenue. Their shares fell 1.8% on Friday.
Some companies have posted large profits instead of losses.
Inc.
shares rose 15.5% on Thursday, their biggest one-day increase in a year, after reporting earnings. Manufacturer of electric cars
Tesla
Inc.
rose 9.1% on Thursday after its quarterly results, while
Netflix
Inc.
Shares rose 5% the day after their October 16 report.
Write to Gunjan Banerji in Gunjan.Banerji@wsj.com
.
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