The Broader Markets

Last Week – SPY was lower by 2.1% last week, more than the 1.1% move options were pricing.

This Week – SPY options are pricing about a 1.6% move (in either direction) for the upcoming week. With the SPY around $435 that corresponds to about a $7 move in either direction, with $428 as a bearish expected move and $442 as a bullish expected move.

Implied Volatility – The VIX ended Friday above 21, up from 18 the week before. It was above 24 several times during the week. That means IV is slightly higher than its historical average entering this week. VIX futures remain upward sloping with January futures above 24. Options are pricing more volatility towards the end of the year than now.

Expected Moves for This Week via Options AI:

Options are pricing larger market moves this week than they priced last week. Here are the expected moves for the week in the major ETFs:

  • SPY 1.6%
  • QQQ 2.0%
  • IWM 2.2%
  • DIA 1.5%

As an example of how the 1.6% expected move translates into strike selections, here’s an Iron Condor with short strikes set at the expected move (based on the close Friday). It would need the ETF to finish between $428 and $442 to see Max Gain:


In the News

As mentioned last week Tesla (TSLA) stock has been moving higher despite the selling in the broader market. The stock finished last week slightly higher. Over the weekend the company reported vehicle deliveries slightly higher than analyst expectations. Options are pricing a nearly 5% move this week (was closer to 3% last week) and about 10% through the end of October. The company reports earnings later this month:


Expected Moves for Companies Reporting Earnings

Options AI puts the expected move at the heart of its trading experience. Traders are able to quickly generate credit and debit trades based on the Expected Move, or to their own targets in context of the Expected Move. More education on Expected Moves and options trading can be found at Learn / Options AI.

Earnings are on the light side this week but pickup next week. This week we see earnings from Tilray and Pepsi.


Tuesday

Pepsi PEP / Expected Move: 2.2% / Recent moves: +2%, 0%, -2%

Thursday

Tilray TLRY / Expected Move: 8.8% / Recent moves: +26%, -7%, -14%


Based upon publicly available information derived from option prices at the time of publishing. Intended for informational and educational purposes only and is not any form of recommendation of a particular security, strategy or to open a brokerage account. Options price data and past performance data should not be construed as being indicative of future results and do not guarantee future results or returns. Options involve risk, including exposing investors to potentially significant losses and are therefore not suitable for all investors. Option spreads involve additional risks that should be fully understood prior to investing. Securities trading is offered through Options AI Financial, LLC a registered broker-dealer.

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