Last Week – CPI Rally, Powell Rout
It was a volatile week, as expected, with stocks rallying into and immediately out of the cooler-than-expected CPI reading only to fall precipitously following the FOMC release and Powell’s press conference. The worst selling came after market participants had time to consider what now looks like a higher rates for longer environment for 2023, and the prospects for that causing a recession. SPY fell 2.6% on the week, less than the 3% options were pricing, but stocks were down 5.5% from Tuesday’s high.
The VIX closed the week under 23, essentially the same as the prior week. SPY IV fell sharply as options were pricing significant moves for the CPI and Fed with options expiring last week near 30 IV into those market-moving events. Dec 30th expiry options are now 18 IV.
This Week – The Fed’s preferred inflation data
SPY options are pricing a 1.9% move for the upcoming week. This is a full 5-day trading week with the Christmas holiday being observed next Monday. There are several earnings reports of interest this week as well as housing starts and a closely observed inflation report that includes food and energy.
Expected Moves for This Week (via Options AI free tools)
- SPY 1.9%
- QQQ 2.3%
- IWM 2.3%
- DIA 1.6%
- Tuesday – Housing Starts
- Thursday – GDP, Initial Jobless Claims
- Friday – Core PCE, Durable Goods, New Home Sales
Earnings This Week
Expected moves for companies reporting this week. Recent moves indicate what the stock did in its past few reports (starting with the most recent). Also included is the 30-day (forward) IV vs the 1-year actual (realized, historical), which gives a sense of how options are pricing the moves relative to how the stock has traded over the past year.
Data is via the Options AI Earnings Calendar and other companies can be found at the link (many free-to-use tools).
- Nike NKE / Expected Move: 6.5% / Recent moves: -13%, -7%, +2%, +6% (30d IV vs 1yr: +11)
- FedEx FDX / Expected Move: 5.7% / Recent moves: +3%, +6%, -4% (30d IV vs 1yr: -4)
- Micron MU / Expected Move: 5.5% / Recent moves: 0%, -3%, -4%, +5% (30d IV vs 1yr: +1)
- Carmax KMX / Expected Move: 11.6% / Recent moves: -25%, +7%, -10%, -7% (30d IV vs 1yr: +35)
- Paychex PAYX / Expected Move: 6.2% / Recent moves: -4%, -4%, +3%, +5% (30d IV vs 1yr: +2)
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, member FINRA and SIPC.