The week ahead in options. Tesla, SPY, QQQ, Bed Bath and Beyond.


The Broader Markets

Last Week – SPY finished higher last week by about 0.8% (or about $4). That was slightly less than the 1.1% move options were pricing. Implied volatility was slightly lower to end the week.

This Week – SPY options are pricing a 1% move (about $5 in either direction) for the upcoming week. With the SPY jaround $475 that is a range of about $470 to $480.

Implied Volatility – The VIX ended Friday around 17.20, down from about 18 the prior week. Expected moves for this week are slightly less than historical averages.

Expected Moves for This Week (Via Options AI)

  • SPY 1% (about $5)
  • QQQ 1.5% (about $6)
  • IWM 1.8% (about $4)
  • DIA 1.2% (about $4.50)

Implied volatility starts the new year lower than it has been over the past month due to the rally by the broader indices into year end. Futures are indicating a higher open (about 0.5% in SPY) to start the first trading day of the new year.


In the News

Tesla reported on Sunday that they delivered 309k new vehicles in the 4th quarter, beating analyst estimates. TSLA stock finished 2021 at around $1060, in the middle of a range for the final 2 months that saw highs above $1200 and a low just below $900. Tesla is set to report earnings the last week of January. Options are not pricing movement outside of that recent high or low until February. Here’s how that range translates into a $25 wide Iron Condor expiring Feb 18th, about a $1400 risk to $1000 reward profile (via Options AI):


Earnings

Earnings announcements are light this week but pick-up in mid-January.

Most of the big financial companies report the week of the 17th, and some of the big tech names including most of FAANG report the week of the 24th. We’ll circle back when the dates are confirmed and expected moves come into focus. Links go to the Options AI calendar, you can search for more upcoming earnings moves there:

Thursday

Bed Bath and Beyond BBBY / Expected Move: 18.1% / Recent moves: -22%, +11%, -12%


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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