$17 Million in Bullish Calls Hit GEV, Tesla, and Google Before Earnings

[00:00:04]Welcome back to Signal Versus Noise, where we take a look at unusual options activity and ask the question whether or not there's something legitimate going on beneath the surface here. Uh today's setup is a three-way race between GE Veronova, GEV, Tesla, and Alphabet Goo or Google. Uh three bullish call tapes, three different levels of conviction, three different ways traders are trying to rent upside for the next catalyst.

[00:00:26]Now, the cleanest trade may be GEV. The richest premium is probably Tesla. The one with the most institutional support is Google. But because markets have a sense of humor, none of those mean the same exact thing. Let's start with GEV, GE Veranova, where the options tape, I think, is probably the cleanest here.

[00:00:44]Traders put about $7.4 million into bullish calls across three prints yesterday, and the core trade was the August 21st $1,100 call. uh took about 4.5 million in premium in 31 days to expiration only about 2% out of the money. Implied volatility was around 68% when the time of the trade was put on.

[00:01:03]90% of the volume came on the ass side.

[00:01:06]Now among the trades here, that's probably the one that I care about the most. The stock is sitting close enough to the strike where this is not some wild hallucination that's going to see a 40% out of the money call hit within a 31day window. It's a nearthe money bet that GEV can keep working after its event catalyst, its earnings report. So the break even is about 8.7% above spot when the trade is put on while the market is pricing at about a 7.2% move around the earnings. So the buyer is paying for a move that's just beyond the expected range. Aggressive, not silly by any stretch of the imagination. The market does silly all the time. We're not talking silly here with this particular GEV trade. The other two may be a little bit sillier, if you will. uh the 1.6 million in call premium for the July 31st 1190 call for example 10 days out and 10% out of the money break evens about 12.4% higher. Then another 1.3 million hit those August 21st $1,300 calls about 20% out of the money with a break even about 22.6% above spot. So those strikes are going to need more than just a good earnings report here.

[00:02:10]We need followth through where the stock not just gets a nice reaction, it gets underwritten and repriced at a new level altogether.

[00:02:18]But perhaps recent earnings history helps the case for G Veronova. GEV over the last eight reports the next day move was about 5.5%. The median path has actually gotten better after the first day. So 5.5% up after 3 days, up 9% after one week and up over 12% over uh uh two weeks. So that matters for your $1,100 call sitting in August because the trade doesn't need everything to happen in a single session right now. As long as it holds above $1,100 and buyers try to roll forward that exposure, this could go into the money pretty quickly.

[00:02:48]Now, Tesla, Tesla took in the most bullish premium at roughly $8 million, but the map is a little messier here.

[00:02:54]There are four trades and I think that they tell four different stories based on people's level of conviction. The first would be the July 28 9th 382 and a half call. 8 days to expiration basically at the money. The premium paid is about 3.3 million with an implied volatility of about 56%. 96% of the trade goes through on the ass side.

[00:03:14]Yeah, break even 4.7% higher. This is the trade around Tesla's earnings this week. Those are due out on Wednesday, July 22nd. Then you have the August 7th 385 call taking it about 2.3 million, 17 days to expiration, about 4% out of the money. Implied volatility sitting around 54% when the trade is put on with a break even about 8% above the spot price. So this one gives the buyer a little bit more time if the initial move holds. So, taking a step back, we're going to cut this Tesla tape into two.

[00:03:42]These first two trades are probably the more serious part of the tape. They put together about 5.6 million in calls at the money. But then the tape gets weird because it's Tesla and Tesla often gets weird. The October 16th 425 call took in about 2.1 million. 87 days out, 12% out of the money with a break even 17% higher. That's definitely a more narrative trade. And then you have this smaller November 20th 665 call 75% out of the money break evens about 75.3% higher given the price paid. So that's not just a a forecast here. We're talking about a lottery ticket maybe lottery ticket wearing a helmet running full boore that a new level of understanding about Tesla's relationship and value with the market is coming forward. So the Tesla math here is interesting. If we're looking at the actual earnings report itself, there's about a 5.6% 6% move priced and while the eight reports previous have produced a 7.5% move on average the next day. So if you're looking at pure event volatility, Tesla looks cheaper than its own history has recently suggested. And that actually is why the near-term at the money calls perhaps make sense. Um Tesla's medium post report path has not been so great. The down slightly the next day, down 1.7% after 3 days and about 3.3% lower after a week. So if you get the move right, the buyer may get the move and still have to fight a bit of a fade. If I'm thinking short term for Tesla and there's a pop, it may be a take the money and run type of situation. So for confirmation, Tesla's going to need to clear 390.40 as an event ceiling here and keep the near money calls active. It stalls under that range. The longer dated upside tickets are just going to look like expensive souvenirs here henceforth. And now Google Alphabet. Google might be the strangest of the three because Wall Street definitely loves it. It has the highest ratings of the board among banks and institutions, but it's barely showing up in the options tape these days. The trade here that we're highlighting is the July 24th 367 and a half calls. 3 days to expiration just on the other side of their earnings report which like Tesla is due out on Wednesday. 5% out of the money. The premium about 1.7 million paid with implied volatility of about 70%. 85% of this trade came through on the asset with a break even about 37410 or about 6.5% above the spot. So let's talk about this earnings report on this event ceiling here. The implied range tops out around 36870. So the strike sits right near the top of what the options market think is possible this week and the break even's just above that. So the buyer does need Google to push through the expected range fairly quickly for this to work and that's not impossible. This is Google after all but one shortdated print does not make a broad conviction signal. I will say the street as noted institutions are supportive of the move and they're certainly stronger than what recent flow has indicated. Bank of America has a 430 target as does truest. You have Wed Bushup at 445, City at 447, at 455.

[00:06:25]The average of that 5day target cluster is around 444, excuse me, $441, which is roughly 26% above the spot price here.

[00:06:32]So, analysts are bullish, but the options market is not giving us any indication that we're going to find that sort of follow-through just yet. The last eight reports also argue for some caution. Google's average next day move following its earnings has been 3.8% over the past eight quarters, and it's beat the implied move only two of the past eight times here. So, the short of data call buyer needs a better than usual reaction very quickly with expensive volatility. That's a tight needle to thread. Now, we love tight needles around here, but they can also poke you in the eye. So, let's just be clear. This is a double-edged sword right now. I think here's the clean read. GEV is the strongest flow signal, right? The $1,100 call is sitting right at the money, right near the money. real premium 90% ask side and it's tied to an event risk that's coming up right around the corner where first day followthrough has actually mattered and moved in the favor of what these traders are looking for Tesla maybe has better event VA debate within the at least these structured trades the near-term premium is real implied volatility looks cheaper than most [clears throat] realized events have seen and the strike map gets noisy when you start looking out into the future especially towards that 665 call um while Google may have the best institutional support it has the weakest options confirmation that we've seen among these three names so far here today. They have one print, three days to expiration, a 70% implied volatility, and a break even above the implied volatility event ceiling. So that needs help immediately. Those are the three trades for today's signal versus noise.

[00:07:54]$17 million in bullish call premium hits three names, three names with very, very different outcomes, very different thesis perhaps for why they're going into place. GEV looks like the cleanest attempt to capture an immediate move to the upside in the earnings. Tesla is more about a rerating. Google just is more of a shot that needs a little bit more gusto to it, having been ignored by options traders up to this point in time. That's today's signal versus noise. Three different names, 17 million in call premium hitting the tape over the past 24 hours, but these trades are not equal. GEV looks like the cleanest options read with an $1,100 strike sitting just above where the stock's currently trading. Tesla looks like someone trying to buy a VET movement at a fair price, but also making a rerating bet. Whereas Google Alphabet, it's simply been ignored and maybe the options tape is underpricing a move. But what do you think is the signal versus noise chat? Let us know below in the comments. This of course has been another episode of signal versus noise.

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