I covered Amazon (AMZN) on Real Money Pro today, and I'll give you a little hint about it: It is everything Alphabet (GOOGL) is not, when it comes to past earnings trends. GOOGL market makers on the options side are pricing a move around 5% -- and while that may feel low, it really isn't far from the current trend and best-fit line.
In fact, we've spent most of the past nine earnings reports maxing out just above, or even below, that level. There are two reports that stand out in terms of volatility, but when you consider eight of the past nine post-earnings closing moves have been 5.6% or less, you quickly realize this is not the long volatility you are looking for in terms of earnings reactions.
GOOGL is primed for some butterflies, targeting a 4% to 5% move in either direction, or even some wide iron condors. But if you are looking to cast your line, hoping to land a lottery-ticket type of move, history and statistics are not on your side. GOOGL is a holding of Action Alerts PLUS and AMZN is a Growth Seeker holding.
If you are looking for a stock to trade, Stamps.com (STMP) has yielded some serious action into earnings over the past five years. This stock has only seen an intraday move of less than 10% twice since October 2010, and one of those times came in at 9.4%. STMP reports today after the close.
Shorting volatility may look like the potential for a big payday, but it's like juggling flaming torches while doused in gasoline and standing atop thousands of sticks of dynamite. Sure, it may be a thrill, but that's a lot of risk to take, especially when you're blindfolded. Add in the terrible spreads on the options, and this should be a no-go for just about everyone.
But STMP does offer the potential for some intraday trading. The stock has demonstrated a wide gap between its open and its maximum move, as well as its closing price. Just last quarter, we saw a huge fade from a 16% gap higher to a close some 5% lower on the day. Historically, the stock has added to its opening direction, but that tune has changed the last two quarters. So if you are looking for some action to trade, you may want to check out STMP.