The Broader Markets
Last Week – SPY closed higher in a volatile week by about 0.5%, inside the 2.4% options were pricing. However, it was lower by almost 5% mid-week before a rally into Friday.
This Week – SPY options are pricing about a 2.2% move this week (about $10 in either direction).
Implied Volatility / VIX – The VIX closed last week just above 27, similar to where it started the week, but was 37 mid-week. As mentioned the past few weeks, traders should be aware of the implied volatility backdrop as it has been changing fairly significantly day to day (and even intra-day).
Expected Moves for This Week (via Options AI)
- SPY 2.2% (about $10)
- QQQ 2.8% (about $10)
- IWM 2.9% (about $6)
- DIA 2% (about $7)
In the News
Tesla (TSLA) stock’s breakout in the Fall of ’21 took it from under $800 to over $1200 in the span of a few weeks. After a late year pullback to under $900 it made another run to $1200 to start 2022. During the market lows of last week it traded as low as $700 before finishing the week back above $800. In other words, it’s been volatile. Options have a difficult job pricing those sorts of stock moves. Looking ahead, options are pricing about a $45 move in either direction for this week and about a $105 move for the month of March, even though the stock has seen those types of moves in a single day recently.
Out of the money calls were typically skewed higher (IV) when the stock was making its run higher last year. That has not been the case recently with a more normal curve skew (over the next few weeks) and Put/Call ratios just slightly tilting towards calls.
Bottom line, Tesla options have been underpricing most of the stock’s moves since last Fall and and continue to price moves of only about $100 month to month. Options implied volatility doesn’t always reflect realized volatility because market makers don’t want to be caught holding the bag on theta and collapsing IV when the music stops. But in this case TSLA stock has been moving wildly since its big breakout and hasn’t stopped making large percentage moves, both higher and lower, since.
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:
Workday WDAY / Expected Move: 6.9% / Recent moves: -4%, +9%, -3%
Zoom ZM / Expected Move: 15.3% / Recent moves: -15%, -17%, 0%
Lucid LCID / Expected Move: 13.6% / Recent moves: +24%
Salesforce CRM / Expected Move: 6.8% / Recent moves: -12%, +3%, +5%
Target TGT / Expected Move: 5.9% / Recent moves: -5%, -3%, +6%
Baidu BIDU / Expected Move: 6.7% / Recent moves: -6%, -6%, 0%
Dominos Pizza DPZ / Expected Move: 7.8% / Recent moves: 0%, +15%, +3%
NIO NIO / Expected Move: 10.8% / Recent moves: -3%, -3%, +2%
AMC AMC / Expected Move: 12.3% / Recent moves: -11%, -6%, +6%
Snowflake SNOW / Expected Move: 5.3% / Recent moves: +16%, +8%, +4%
Okta OKTA / Expected Move: 8.8% / Recent moves: +12%, +3%, -10%
Coupang CPNG / Expected Move: 12.4% / Recent moves: -9%, -8%, -9%
Broadcom AVGO / Expected Move: 5.2% / Recent moves: +8%, +1%, +2%
Costco COST / Expected Move: 3.5% / Recent moves: +7%, +3%, -2%
Best Buy BBY / Expected Move: 8.9% / Recent moves: -12%, +8%, +1%
Marvell MRVL / Expected Move: 10.0% / Recent moves: +18%, -3%, +5%
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.