The Broader Markets
Last Week – The SPY was essentially unchanged last week although it saw intra-week moves of close to 1.5% in either direction. Options were pricing about a 1.3% move.
This Week – SPY options are pricing about a 1.4% move (about $7 in either direction) for the upcoming week. With the SPY around $464 that is a range of about $458 to $472.
Implied Volatility – The VIX ended Friday around 19. That level is about in line with historical averages.
Expected Moves for This Week (via Options AI)
- SPY 1.4% (about $7)
- QQQ 2% (about $8)
- IWM 2% (about $4.50)
- DIA 1.2% (about $4.50)
In the News
We’ve highlighted the 15% or so range (in either direction) that TSLA stock has traded in since its breakout in October 2021. The stock has found resistance at the $1200 level and support near $900. The stock finished last week near the center of that range. The company reports earnings Wednesday Jan 26th. Here’s a look at an Iron Condor in the Feb 18th (monthly) expiry. The short strikes of the fly set at the recent support and resistance. You’ll note that is roughly in line with the expected move options are pricing. The risk/reward of the $5 winged Condor is about 2.70 to 2.30. In other words, options are pricing a move to recent support or resistance for earnings, and a breakout or breakdown would mean options were underpriced into the event. (via Options AI):
Earnings announcements pick up this week with Netflix, large financials and airlines highlighting the next few days. The following (last) week of January will see names like Apple, Microsoft and Tesla report. The day of the week Links go to the Options AI calendar where you can see the other companies each day and click through to see charts. Recent earnings moves (actual) start with the most recent:
Charles Schwab SCHW / Expected Move: 2.9% / Recent moves: +4%, -2%, -3%
Goldman Sachs GS / Expected Move: 3.2% / Recent moves: +4%, -1%, +2%
Bank of America BAC / Expected Move: 3% / Recent moves: +4%, -3%, -3%
United Health UNH / Expected Move: 3% / Recent moves: +4%, +1%, +4%
Morgan Stanley MS / Expected Move: 3.5% / Recent moves: +2%, 0%, -3%
United Airlines UAL / Expected Move: 4.8% / Recent moves: -1%, +4%, -9%
Netflix NFLX / Expected Move: 6.3% / Recent moves: -2%, -3%, -7%
American Airlines UAL / Expected Move: 5% / Recent moves: +2%, -1%, -4%
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.