This Week in Vol: Big Reports, Small Prices

The vol snapshot

The VIX closed Friday at 19.99, up from 14.84 a week earlier. Most of that came on Friday, a 21% jump. That is the highest close since July 29. SPY fell 2.0% on the week to 763.25, and QQQ fell 5.5%.

SPY one month implied vol is 13.8, up from 11.7, which moves it from the 3rd percentile of its year to the 43rd. The curve still slopes up, from 14.6 in mid November to 17.7 a year out, but the front rose 2.2 points and the far end only 0.5.

Last week's CPI question has its answer, and inflation ran hot. Consumer prices rose 3.7% over the year, up from 3.4%, and core came in at 2.6% against 2.5% expected. SPY was priced for 0.55% on Wednesday and fell 1.08%, about twice the priced move. Producer prices on Thursday were hotter still: up 1.3% in September against 0.6% expected, the biggest jump since March 2022, and 6.3% over the year. Core rose 0.7% against 0.3%, and energy drove more than 80% of the headline rise.

Oil is where that heat comes from. WTI crude rose every day last week, 7.8% in all to $99.02, and Brent gained 4.9% to $109.86, 3.7% of it on Friday. On Tuesday Paul Tudor Jones told CNBC he is long oil, sees room for another $20 to $25 a barrel, and expects 2027 to be "really, really challenging for the stock market." Oil options have barely reacted. USO one month IV ended the week at 47.4, up from 45.5, while the fund rose 9.2%.

Bonds rallied anyway. The ten year yield fell about 15 basis points to 5.10%. The MOVE closed at 101.1, up from 98.5, about 6.4 basis points of implied daily movement in Treasury yields.

Movers

QQQ one month IV went from 17.5 to 21.8, the 8th percentile of its year to the 63rd. Netflix and Meta jumped to the 91st and 84th as their reports moved inside the one month window.

The week ahead

Most of the table is priced below its own history, and the three lowest are Newmont at 0.53, Tesla at 0.56 and Meta at 0.58. CME is the exception at 1.64, priced for 2.4% against a 1.5% average.

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. 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.

Last week's seven: five stayed inside. The two that got out were both priced above their history. Johnson & Johnson was the richest in the table at 1.31 and fell 5.7% against 2.4% priced. Bank of America, at 1.13, fell 4.8% against 2.8%. The three cheapest, UnitedHealth, ASML and TSM, all stayed inside.

One vol concept: the earnings move and its premium

Tesla's straddle to Friday costs $26.32, or 7.4% of the stock. That price covers five sessions, and only one of them, Thursday, carries the reaction to the report. The earnings move takes the four ordinary sessions out and prices the report on its own. For Tesla that is 5.0%, and it's the Implied move column in the table above.

The premium divides that by the stock's average move across its last twelve reports. Tesla's 5.0 against 9.0 gives 0.56, a little over half its usual reaction. The average hides a wide range, though. Tesla's last three reports moved it 14.5%, 3.6% and 3.5%, and eight of the last twelve moved it more than 5.0%. The premium tells you where this quarter's price sits against the stock's own past. It can't tell you which kind of quarter this one will be.

One terminal tip

Open Upcoming Earnings in the Terminal. It lists every company reporting this week with the same three numbers as the table above, Imp Move, Avg Move and Imp/Avg. See it on ApexVol, free 7 day trial.

Tesla and Meta both report Wednesday night, each priced at a little over half its usual move. Next week we find out whether that was enough.

Ryan

Educational content, not investment advice.