The Broader Markets

Last Week – SPY was higher by about 0.7% (or $3) last week, less than the 1.5% (or $6) move options were pricing.

This Week – SPY options are pricing about a 1.1% move (in either direction) for the upcoming week. With the SPY around $444 that corresponds to about a $5 move in either directions, with $439 as a bearish expected move and $449 as a bullish expected move.

Implied Volatility – The VIX ended Friday just under 18, down from 21 the week before. It spiked as high as 28 during Monday’s selloff. That means IV is slightly lower than its historical average now. VIX futures remain upward sloping with December futures near 22 and January futures near 23, both lower since last week. Options are pricing slightly more volatility towards the end of the year than now, but less so than last week.

Expected Moves for This Week via Options AI:

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

  • SPY 1.1%
  • QQQ 1.3%
  • IWM 1.9%
  • DIA 1.1%

As an example of how the 1.1% 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 $440 and $449 to see Max Gain:


In the News

As mentioned last week Tesla (TSLA) stock had been moving higher, attempting to break above its April highs of around $762. (Its ATH from January is nearly $900). Options were pricing about a 3% move last week and the stock finished about 2% higher. With the stock now $774 options are again pricing about a 3% move this week and now about 9% by the end of October, a month in which the company reports earnings:


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 over the next few. This week we see earnings from Micron, Bed Bath & Beyond, Carmax and more.


Monday

Aurora Cannabis ACB / Expected Move: 11% / Recent moves: 0%, -6%, -14%

Tuesday

Micron MU / Expected Move: 4.7% / Recent moves: -6%, +5%, -2%

Thursday

Bed Bath & Beyond BBBY / Expected Move: 11% / Recent moves: +11%, -12%, -11%

Carmax KMX / Expected Move: 4.8% / Recent moves: +7%, -7%, -8%


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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