The Broader Markets
Last Week – SPY finished the week above its bullish expected move, up 1.5% vs the 0.8% options were pricing. The SPY has moved more than its expected move and established new highs over the past few weeks, while its implied volatility (and expected move) has compressed as moves have mostly been in one direction to the upside.
This Week – SPY options are pricing about a 0.7% move (in either direction) for the upcoming (4 day) week. That corresponds to about $429 as a bearish consensus and $437 as a bullish consensus.
Implied Volatility – The VIX was lower into the holiday weekend, closing at around 15. That’s the lowest levels of market implied volatility since pre-pandemic. In January 2020, before the Covid sell-off, the VIX was as low as 12. Its historical mean is near 19 but that incorporates long periods of time of low volatility (and the VIX in the low teens) with occasional bouts of extreme volatility and spikes in the VIX.
Looking out on the VIX futures curve, December VIX futures are about 22. In other words, near-term options are compressed, while expectations of future volatility (and therefore latter month option prices) are trading higher.
Those looking for near-term hedges will find options prices on the inexpensive side historically, and the least expensive in over a year. Those implementing short premium strategies near term (covered calls and iron condors, credit put/call spreads etc.) will find the premiums (or ranges that they are selling) tighter than they have been in over a year.
Expected Moves for This Week via Options AI:
- SPY 0.7% (was 0.8% last week)
In the News
As markets made new highs meme stocks were once again some of the most actively traded names, yet their implied volatilities (and expected moves) have tended to compress from a few weeks ago. Here are the expected moves for this week in some of the trending tickers, and their change vs their expected moves from last week (mostly less, albeit with a 4 trading day week):
- Gamestop GME 8% (was 13% last week)
- AMC Theaters AMC 13% (was 15% last week)
- Virgin Galactic SPCE 13% (was 19% last week)
- Contextlogic WISH 11% (was 16% last week)
- Clover Health CLOV 11% (was 13% last week)
- Workhorse WKHS 11% (was 10% last week)
Expected Moves for Companies Reporting Earnings
Earnings reports are on the light side this week. Things pick up over the next few weeks with some of the banks next week and big tech later in the month.
The Options AI Earnings Calendar is a free resource to keep up to date on upcoming earnings, how options are pricing potential moves, and how that compares to actual moves from prior earnings (starting with most recent).
Options AI puts the expected move at the heart of its trading experience. Traders are able to quickly generate trades based on the move, or to place their own price target in context of the expected move.
More education on expected moves and spread trading can be found at Learn / Options AI.
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.
