AppLovin Options Trade Breakdown — Full Breakdown & Transcript

[00:01] interesting earning setups of the entire season. Welcome back to Signal versus options activity on the tape and ask what the market is saying beneath the move. Today's name is Apploven, ticker A, where the call flow is smaller than

[00:17] what we've seen in some recent episodes, but the historical earning setup may be one of the more intriguing in recent memory here. Apploven reports Wednesday, August 5th, after the close. The street's looking for about a $3.72 in

[00:30] street's looking for about a $3.72 in EPS on $1.94 billion in revenue, up 52 to 55% year-over-year. Um, options are pricing at about an 11.5% move right now. So, that does sound big unto its own right. In a recent episode, we

[00:44] talked about AMD where there was an 8.58% implied move and that was notable for its own history. But when you take a look at what's going on with AppLoven, that actually may seem small. Over the last 10 earnings reports, AppLovven's

[00:57] average 1-day move was 17.4%. One week later, the average move was 21.5%. nine of the last 10 times, and it was still higher a week later, seven of the last 10. So, as a comparison, if you go back to the prior video on AMD, that's a

[01:13] But let's get to the trade. Someone bought the August 21st 410 calls for 3.37 million in call premium. 18 days to expiration right at the money. Implied expiration right at the money. Implied volatility 98% 99% of the volume came on

[01:27] the ass side and about a fifth of it was swept. So that's really aggressive clean. Someone definitely saying I want this position and I want it now. So when earnings almost entirely on the ass side with enough duration to capture the

[01:40] have a plan here. This is definitely not some moonshot or miracle type of trade. You're not reaching for, you know, out of the money call. You're looking for a big move to the upside. The buyer is basically paying apploving to do what it

[01:55] usually does after earnings move hard quickly and then keep adding some of here. The premium is definitely rich. No volatility is expensive. But with Apploven, expensive volatility is kind

[02:09] different than if you're trading a Tesla. The average price move over the past 10 reports was 12.4% while the average actual 1day move was 17.4. So options have been uh underestimating, underpricing the move entirely, so to

[02:25] trade here, right? The market's pricing 11.5. History says the stock can do more than that. The last 10 print record is basically absurd. Q3 24 46.3% the next basically absurd. Q3 24 46.3% the next day, 68.5% one week later. Q4 24% next

[02:41] day, 68.5% one week later. Q4 24% next day 29.9% one week later Q1 25 11 I mean do I need to keep going through this it's the same thing this is why traders tends to move a lot there is caution though recent history Q425 went the

[02:55] wrong way the stock dropped 19.7% the next day and was still down nearly 12% one week later the Q1 report was a little bit positive up 6.4% 4% one day later but faded down 3.3% a week after. So yes, AppP 11 has a very interesting

[03:09] longerterm profile, but the two most recent reports indicate that there is at least some room for wobble and that may be the one thing that this bull needs to overcome. But the other major difference between AMD and some of the other names

[03:21] reports this season, especially those mega cap tech names, has been the float. Apploven has 306 million shares outstanding against a $1 133 billion market cap. Just example going back to that last episode, AMD has 1.63 billion

[03:36] shares, more than five times the paper out there. App has also bought back 76.6 million of shares, about 21.4% of the company for about $4.18 billion. So the shrinking float kind of helps explain why this thing can gap 20, 40, even 46%

[03:52] on a single print. There's just less paper out there to absorb demand when strong directional pull. That shrinking float helps explain by the stock can go by 20 40 46% on a print. There's just less paper out there to absorb demand

[04:06] directionally on what it wants to do with the shares. And I think that's underwriting. You got have a tight float. You have a strong earnings reaction history. A stock 45% off of its highs and a consensus price target

[04:21] the current price. So the setup is fairly clean. The 410 [clears throat] call is just the level since it's at the money and runs through August 21st. The buyer does not need a heroic move here henceforth in order for this thing to

[04:34] expected move to the upside and avoid that postprint fade that has plagued the stock in the most recent cycle. So that's the signal versus noise setup for today. You have one of the best earnings movers on the board in Apploven coming

[04:48] up this week on Wednesday, August 5th. Nine of the past 10 reports has closed 10 reports has closed higher the next week. Options are pricing about 11.5% move and your average 1day move is 17.4%. So the call buyer went right at

[05:02] the money through the print at 99% asset volume. I think that's a lot of signal there. Clearly a lot of interest, a lot of demand, but what do you think? What's the signal versus noise for Apple loving coming up this week? Let us know your

[05:14] course has been another episode of Signal Versus Noise. You've been watching Tasty Live. Like and subscribe for more videos.