The Broader Markets
Last Week – SPY was lower by about $8, or 2% last week, less than the 2.5% ($11) move options were pricing. Implied volatility is about the same as last week.
This Week – SPY options are pricing about a 2.4% move this week (about $10 in either direction). SPX Futures were down about that much on the Ukraine news overnight before rebounding.
Implied Volatility / VIX – The VIX closed last week just shy of 28. It had a range of about 24 to 31 during the week. As mentioned last week, traders should be aware of the implied volatility backdrop as it has been changing fairly significantly day to day (and even intra-day). What position is chosen when the VIX is near 20 or when it is above 30 can add headwinds or tailwinds to those positions, even trades with short time horizons.
Expected Moves for This Week (via Options AI)
- SPY 2.4% (about $10)
- QQQ 3.2% (about $11)
- IWM 3.0% (about $6)
- DIA 2.2% (about $7.5)
In the News
Cryptocurrencies have bounced off recent lows but are still significantly lower than their Nov 2021 highs. One of the more high-profile equities in the space, Coinbase reports this week. COIN is down nearly 50% since Nov 21. It is lower than its IPO reference price of $250 and significantly lower than the intra-day high it saw on its first day of trading (above $400).
Options are pricing a move of about 11% for earnings, (or about $21). With the stock $187, a $21 move lower would take out recent lows. In other words, the bearish expected move would mean a new low. And on the upside, a $21 move higher would not reach the $220 resistance level. In other words, the bullish expected move is not pricing a move back to obvious resistance. You can see the difference in probability assigned by the options market at those support and resistance levels.
This can help inform strike selection beyond or inside of the expected move. For instance, those that are bullish could target the resistance level for the potential for extra reward beyond the expected move. And for those that are bearish, the options market is not putting a lot of weight on the stock being able to hold that support level if the stock goes lower on earnings. Therefore a move lower would be into uncharted territory, a situation that has seen outsized moves lately in other names.
And finally, BTC options are pricing about a 6% move this week, less than the 11% COIN options are pricing, for those that see COIN trade more as a proxy than anything else.
Links go to the Options AI calendar where you can see the other companies each day and click through to see charts (free to use). Recent earnings moves (actual) start with the most recent:
Home Depot HD / Expected Move: 4.5% / Recent moves: 6%, -4%, -1%
Macy’s M / Expected Move: 11.3% / Recent moves: +21%, +20%, 0%
Palo Alto Networks PANW / Expected Move: 8.3% / Recent moves: +2%, +19%, +6%
Mercado Libre MELI / Expected Move: 10.8% / Recent moves: +5%, +14%, -6%
Teladoc TDOC / Expected Move: 10.8% / Recent moves: +8%, +1%, -8%
Lowes LOW / Expected Move: 5.3% / Recent moves: 0%, +10%, -1%
Overstock OSTK / Expected Move: 15.8% / Recent moves: +20%, -3%, +5%
eBay EBAY / Expected Move: 7.4% / Recent moves: -6%, +1%, -10%
Alibaba BABA / Expected Move: 7.6% / Recent moves: -11%, -1%, -6%
Moderna MRNA / Expected Move: 9.8% / Recent moves: -18%, -1%, -1%
Coinbase COIN / Expected Move: 11.2% / Recent moves: -8%, +3%, -3%
Block SQ / Expected Move: 14.8% / Recent moves: -4%, -2%, -1%
Beyond Meat BYND / Expected Move: 14.8% / Recent moves: -13%, +2%, -7%
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.