Options skew shows Big Tech earnings optimism, Nations Indexes says

Options traders are paying unusually high prices for upside exposure in several large technology stocks heading into earnings season, according to Nations Indexes. Its RiskDex measure ranked Meta Platforms and Microsoft at the top of a screen of the most actively traded S&P 500 stocks, followed by Amazon, Tesla and Advanced Micro Devices.

The findings point to elevated demand for call options in names whose performance can influence the direction of major U.S. equity benchmarks. The S&P 500’s ability to reach a fresh high may depend in part on whether the so-called Magnificent Seven can regain market leadership, according to the market framing around the analysis.

How the options signal works

RiskDex compares the pricing of call options that sit one standard deviation above a stock’s current price with put options that sit a comparable distance below it. A call gives the buyer the right, but not the obligation, to buy shares at a set price, while a put gives the right to sell at a set price.

The measure then places that call-versus-put relationship within the stock’s own range over the past year. That second step matters because some shares often trade with expensive calls relative to puts. Nations Indexes’ approach highlights cases where bullish options demand is not only high in absolute terms, but also high compared with the stock’s recent history.

Meta recorded a RiskDex score of 0.75, which Nations Indexes said meant one-standard-deviation out-of-the-money calls were 25% more expensive than comparable puts. That reading stood in the 91st percentile of call-heavy readings for Meta over the past year.

Microsoft posted a 0.79 ratio, placing it in the 93rd percentile of its 12-month range, according to the same analysis. Amazon’s RiskDex was 0.98, showing calls only slightly more expensive than puts, but still in the 92nd percentile relative to its own history.

Tesla and AMD also showed elevated bullish skew compared with their 52-week records. Nations Indexes put both in the top 80th percentile of call-heavy readings, with ratios near 0.9 for each stock.

Contrarian warning from Nations Indexes

Scott Nations, president of Nations Indexes, said the breadth of bullish options pricing could be read as a warning rather than a clean signal of gains ahead.

“When you get this many names that have this much call skew, I think it’s a contrary indicator,” Nations said by phone. “The bullishness is so extended that they’re priced for perfection. I would think these people are setting themselves up for disappointment, look at how Nvidia gave great numbers and just kind of melted.”

If the shares do rise after their earnings reports, the move would mark a shift in recent market leadership. Meta and Microsoft have not set records in nearly a year, and Amazon has lagged the Nasdaq 100 so far this year, according to the analysis.

The options data does not determine where shares will trade after results. It shows how investors are pricing upside and downside risk before earnings, and whether that pricing is unusual for each stock.

This story draws on original reporting from CNBC.