This Week in Vol: The VIX Calmed Down and Nvidia Didn't

The vol snapshot

The VIX closed Friday at 19.30, down 6.34 from last Friday's 25.64. Most of the drop came on Monday, when the S&P 500 rose 2.3% and the VIX fell 22% to 19.92, its 15th largest one day fall since 1990. By Thursday's close of 18.70 it had given back 82% of the November 5 jump.

The S&P 500 rose 2.5% on the week and the Nasdaq 100 rose 3.5%. Nvidia fell 12.7%. It fell on four of the five days, Monday included, when it lost 4.3% while the Nasdaq 100 gained 3.4%. It goes into Tuesday's report 31.9% below its October 6 close.

The SPY curve has its upward slope back. A week ago the expirations around the CPI print carried 21.4 and 22.6 implied vol, above December at 20.3. Now Monday's options carry 10.8, Wednesday's 14.8, December's 15.2 and March's 16.0.

Bond vol went the other way. October CPI came in a tenth above forecast on both headline and core, at 0.4% and 0.3% for the month. The ten year yield rose 29 basis points on the week to 5.15%, and the MOVE index rose from 92.77 to 98.79, about 6.2 basis points a day.

Movers

NVDA has one month implied vol of 49.4 with the earnings effect removed, up from 47.7 a week ago and higher than almost every day of its past year. Counting Tuesday's report, the one month figure is 59.4.

QQQ and IWM have pulled apart. Nasdaq 100 implied vol is 23.6, the 79th percentile of its year, while Russell 2000 vol is 18.3, the 21st percentile. Over the past year the two averaged 21.1 and 21.0. The vol is sitting in the largest tech names while small caps sit near the low end of their range.

PCG has one month implied vol of 61.4 against 18.6 realized over the past month. That 42.8 point gap is the widest of any stock above $20 billion on our screen, and the implied level sits at the 97th percentile of its year. Edison International, also a California utility, shows the same shape at 38.5 against 19.1. Neither has a report inside the month.

BIIB has implied vol of 48.6, the top of its year and well above its one year average of 34.1. No report is due. Biogen presents Alzheimer's data at a medical conference this week.

The week ahead

Nvidia reports Tuesday after the close. It moved an average of 3.8% a day this week, and its options price 6.1% for the report, against an average of 5.6% across its last twelve reports. Five of those twelve moved more than 6.1%. Options expiring Wednesday, the first session after the report, carry 92.5 implied vol.

The rest of the week belongs to the retailers. Home Depot reports Tuesday, Lowe's, TJX and Target on Wednesday, and Walmart on Thursday. October retail sales print Tuesday at 8:30 ET, and the minutes of the last Fed meeting come out Wednesday at 2:00 ET, the same session as Nvidia's reaction.

Implied move is what options price for the report itself. Realized average is the average absolute move across the last twelve reports, or as many as the company has made, measured close to close, using the next session close for reports after the bell and the same day close for premarket reports. Premium is implied divided by realized. Red marks a premium of 1.2 or more, where options price the report above its history, and green marks 0.8 or less, where they price it below.

The three retailers that usually move least carry the richest prices. Home Depot has averaged 2.0% across twelve reports and its options price 3.6%. Lowe's and TJX are priced near one and a half times their history. Target, Walmart and PDD sit below theirs, and Disney is priced at 4.3% against a 6.7% average.

Last issue's table had eleven names and three moved more than priced. CoreWeave rose 24.7% against 14.3% priced, Constellation Energy rose 10.5% against 4.9% and Take Two rose 8.3% against 6.1%. Constellation needs a footnote. It reported Monday morning, the day the S&P 500 rose 2.3%, and opened up 4.2%, inside its priced move, before running further during the session. Cisco came closest among the eight that held, down 6.2% against 6.6%.

One concept: how fast spikes fade

Volatility mean reverts, and big spikes tend to fade fast. A shock day pulls in hedgers and pushes out sellers. If nothing follows it, both flows reverse and implied vol drifts back down.

Since 1990 the VIX has closed up 50% or more in a day eleven times, counting November 5. Five sessions after each of the ten earlier jumps, six had given back at least half of it. This one had given back 82% after five sessions, which ranks fifth of the eleven.

The slow ones are the warning. In July 1990 the VIX jumped a week and a half before Iraq invaded Kuwait, and it stayed above the halfway mark for the rest of the year. After the Omicron news in November 2021 it was higher five sessions later than on the day itself. A spike fades when nothing follows it, and on the day of the spike nobody knows yet whether something will.

In the Terminal

The Earnings Straddle Backtest module runs twelve quarters of straddle results and an edge score for any ticker, so before Tuesday you can see how Nvidia's priced move has compared with what it delivered, report by report. Open the Terminal with a free 7 day trial.

Most of the crash day has already faded out of the VIX. Tuesday night is the next test of how long the quiet lasts.

Ryan

Educational content, not investment advice.