The Broader Markets
Last Week – SPY finished last week down about half a percent (or $2). That was well inside the 2.4% (or $11) options were pricing for the week. However, SPY traded in a $15 range and was higher by about $10 and lower by about $5 during the week. Implied volatility was higher on the week with the VIX closing on Friday above 30.
This Week – SPY options are again pricing about a 2.4% move (about $11 in either direction) for the upcoming week. With the SPY 453.50 that is a range of about 442.50 to 464.50.
Implied Volatility – The VIX ended Friday around 30.50, up from around 28 to start the week. That means expected moves are large (historically) in all the market ETFs, particularly the QQQ and IWM:
Expected Moves for This Week (Via Options AI)
- SPY 2.4% (about $11)
- QQQ 2.9% (about $11)
- IWM 4.1% (about $9)
- DIA 2.5% (about $9)
If the market were to find footing implied volatility could quickly contract, although on some of the higher moves last week volatility stayed bid, as expectations for short-term swings remained high. The VIX is now in backwardation, meaning front month volatility is now slightly higher than outer months. But even outer months are historically high.
For example: December VIX futures are around 28.50, while Jan and Feb are near 28. May is around 27.50.
In the News
Cryptocurrencies sold off over the weekend, particularly Bitcoin which is down nearly 30% in the past month. BTC options are pricing about an 8% move for this week and about a 16% into year end.
Expected Moves for Companies Reporting Earnings
With market implied volatility high, expected moves for earnings need to price the event itself but also the moves of the market in the days up to and after the earnings itself. In other words, when the VIX is 14 an expected move for earnings is almost entirely made up the event move expectations, when the VIX is 30, it needs to also account for a market that is expected to move by itself.
The expected moves link to the Options AI Calendar. Recent moves on prior earnings start with the prior quarter.
Coupa COUP / Expected Move: 10.6% / Recent moves: -4%, -8%, -5%
MongoDB MDB / Expected Move: 13.1% / Recent moves: +26%, +16%, -6%
Gamestop GME / Expected Move: 14.4% / Recent moves: 0%, -27%, -34%
LuluLemon LULU / Expected Move: 7.9% / Recent moves: +10%, +4%, -3%
Chewy CHWY / Expected Move: 13.5% / Recent moves: -9%, -6%, +5%
Costco COST / Expected Move: 3.7% / Recent moves: +1%, -2%, -1%
Broadcom AVGO / Expected Move: 3.9% / Recent moves: +1%, +2%, +1%
Oracle ORCL / Expected Move: 5.6% / Recent moves: -3%, -6%, -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.