This week in options. SPY, QQQ, Baidu, Broadcom, Lululemon, Mongo DB and more.


The Broader Markets

Last Week – After a period of declining volatility and moves in line with expectations volatility roared back and the SPY declined 4.3% on the week, significantly more than the 1.7% move options were pricing.

This Week – SPY options are pricing a 2.2% move for the upcoming week.

Implied Volatility / VIX – The VIX closed the week near 26, up from 21 last week and 19 the week before. VIX futures are still higher than spot but no longer the steep curve we saw the past few weeks. December futures are near 28 and Jan 2023 and beyond months are all above 28,

Expected Moves for This Week (via Options AI)

  • SPY 2.2% (+/- $9)
  • QQQ 2.8% (+/- $9)
  • IWM 2.7% (+/- $5)
  • DIA 2% (+/- $6.50)


In the News

The big news last week was the Powell-triggered sell-off on Friday. Markets had a bad reaction immediately and then got worse all day.

The selling caught options off guard. The VIX was below 20 in mid-August, something we hadn’t seen since April. Back in April a sub-20 VIX preceded a market sell-off that took the VIX above 34. Another IV spike above 34 in June marked the lows of the year in the SPY and preceded the recent rally.

The VIX closed below 26 on Friday, still below the middle of this year’s range. SPY options are pricing a weekly move near 2%, while in prior selloffs this year SPY options were regularly pricing moves of more than 3%. In other words, selling IV at these levels is positioning that Friday’s selloff won’t continue. While buying IV at these levels is positioning that the market is headed back towards the yearly lows.

For its part, the SPY is now roughly 15% off its highs, and 10% from its low on the year. SPY options are pricing about 10% move in either direction for the rest of 2022:


Education

6 Option Spread Strategies to Know


Earnings

Links below 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:

Tuesday

  • Best Buy BBY / Expected Move: 8% / Recent moves: +1%, +9%, +12%
  • Baidu BIDU / Expected Move: 12.3% / Recent moves: +14%, +7%, -6%
  • Crowdstrike CRWD / Expected Move: 8.2% / Recent moves: -7%, +13%, +4%
  • Chewy CHWY / Expected Move: 11.6% / Recent moves: +25%, -16%, -8%

Wednesday

  • Mongo DB MDB / Expected Move: 11.5% / Recent moves: +19%, +19%, +16%
  • Okta OKTA / Expected Move: 9% / Recent moves: +5%, -8%, +12%
  • Five Below FIVE / Expected Move: 7.4% / Recent moves: -1%, -7%, +5%

Thursday

  • Broadcom AVGO / Expected Move: 4.6% / Recent moves: +1%, +4%, +3%
  • Lululemon LULU / Expected Move: 6.7% / Recent moves: -1%, +10%, -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.

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