This Week in Vol: Calm Index, Jumpy Stocks

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Once it is connected, you can ask a vol question in plain English and Claude answers from the same live data behind this email. Two to try this week: "What is SPY pricing for CPI on Wednesday?" and "Which banks reporting this week are priced above their own earnings history?" Every paid plan includes it, and so does the free 7 day trial.

The vol snapshot

The VIX closed Friday at 14.84, down from 15.31 a week earlier. SPY rose 1.2% on the week to 778.57. Its one month implied vol is 11.7, the 3rd percentile of its year. Last week it was the 15th. The curve slopes up cleanly, from 12.4 in mid November to 17.2 a year out.

CPI lands Wednesday at 8:30. As of Friday's close, the SPY curve prices Monday's session at 0.41%, Tuesday at 0.41% and Wednesday at 0.55%, about $4.30 on the index. An ordinary day at the one month level costs about 0.74%, so the inflation print is priced below an average day.

Bond vol gave back its whole jump. The MOVE closed Friday at 98.5. That's down from 107.3 the Friday before and 113.6 at Monday's close. It works out to about 6.2 basis points of implied daily movement in Treasury yields. The ten year closed at 5.24%, little changed on the week. TLT one month IV fell to 13.8 from 16.3, and it now sits at the 92nd percentile instead of the 99th.

Movers

• TMUS, VZ and T. The three carriers fell 13.3%, 8.8% and 9.8% on Friday. TMUS one month IV is 41.9, the top of its one year range. VZ is at 30.5 (98th percentile) and T at 33.1 (96th). All three report within three weeks: T on October 21, VZ on the 26th, TMUS on the 28th.
• MRNA. One month IV 112.9, the 98th percentile. The stock rose 14.2% on Friday and 66% in a month. The November 5 report is already priced at 12.0%.
• STWD. Still at the 99th percentile, nearly four standard deviations above its one year average, and down 17% in a month. This is its second week on the list.

The week ahead

Bank earnings start Tuesday, the same week as CPI. The big banks are priced close to their own history. Johnson & Johnson is the richest at 1.31. UnitedHealth and ASML are the cheapest at about 0.7, but UNH is still priced for a 5.1% move, the biggest in the table.

Implied move is what options price for the report itself. Realized average is the average absolute move across the last twelve reports, 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.

Last week's four: three stayed inside. Constellation Brands rose 2.4% against 3.4% priced, and Tilray stayed well inside its 7.8%. Delta opened down 3.0% and closed flat, inside its 4.3% whichever way you measure it. Pepsi was the one that got out, up 3.7% against 2.6% priced. At 0.73 it had looked cheap, and it was.

One vol concept: a calm index full of jumpy stocks

SPY one month IV is 11.7, the 3rd percentile of its year. TMUS is at 41.9 and JPM at 25.0. How can the basket be quieter than almost everything in it? Correlation. When one stock drops on its own news and another rises on its own, the moves cancel inside the index. Index vol only climbs when stocks move together, the way they do in a selloff. A low index IV says the market expects stocks to keep going their own way. It says much less about any single name, which is how an index at the 3rd percentile can hold three carriers at the 96th and above.

One terminal tip

Before Tuesday, open the Earnings Straddle Backtest on JPM. It shows how the straddle did on each past report, so you can see whether 2.4% has usually been enough. See it on ApexVol, free 7 day trial.

Wednesday tells us whether 0.55% was enough for CPI.

Ryan

Educational content, not investment advice. Claude and the Claude logo are trademarks of Anthropic; ApexVol is an independent connector.