The vol snapshot
The VIX closed Friday at 14.53, up 0.10 on the week, after touching 16.34 on Tuesday and giving all of it back. One month SPY implied vol is 12.2, which ranks 7 out of 100 against the past year, less than a point above the 11.5 the index has realized over the past month. The front of the curve is steep, from 5.9 vol on Tuesday's expiry to 10.5 on September 17, so the market is charging for the calendar, not for the level.
Bond vol is where the inflation worry lives. The MOVE index closed Friday at 73.1, up 2.1 on the week and off a Wednesday high of 79.7, with the ten year at 4.78%. That implies roughly 4.6 basis points a day in Treasury yields.
The macro setup
Producer prices are running between 4.7% and 5.1% year over year depending on which print you count, and consumer prices are in the mid 3s. That gap of a point and a half is margin someone is absorbing, and both numbers refresh this week, PPI on Thursday morning and CPI on Friday. The Fed has been steering attention toward PCE as its inflation gauge, and that print does not arrive until after the September 16 meeting. So the market gets the two numbers the Fed says it weights less before the decision, and the one it weights more after.
Futures price about 15 basis points of tightening for the September 16 meeting, roughly a 60% chance of a 25 basis point hike from the current 3.50 to 3.75% range, and 31 basis points by December. Last week it was 34.
Read off the SPY curve, an ordinary session this week costs about 0.44% of expected move. Thursday's PPI session costs 0.55%, Friday's CPI session 0.73%, and the FOMC session on the 16th 0.87%, nearly double a normal day. Every one of those is under seven dollars on a 770 index, which is what a 7th percentile vol level looks like in practice.
IV rank movers
- SPY: IV rank 7, one month IV 12.2 against 11.5 realized. Index vol is priced for a quiet month with three scheduled reasons for it not to be.
- ORCL: IV rank 56, but the Friday expiry trades at 106 vol against 61 in November. The last eight reports split four up and four down, including a 32% gap last September.
- ADBE: IV rank 71, the highest of the year, for a name where seven of the last eight reports closed lower the next day.
- VLO and MPC: IV rank 95 and 93, both up more than 22% over the past month. Refiner vol was on this list last week and has not come down.
The week ahead
Six names with listed options report in the next seven days. Not one of them is priced above its own 12 report average. Oracle and Adobe on Thursday after the close are the two that matter for the index, and both are priced well under their history.
| Ticker | Reports | Implied move | Realized avg (12q) | Premium (IV÷real.) |
|---|---|---|---|---|
| GME | Tue Sep 8 (AMC) | ±5.0% | 9.7% | 0.52 |
| CHWY | Wed Sep 9 (BMO) | ±7.3% | 8.9% | 0.81 |
| ORCL | Thu Sep 10 (AMC) | ±8.0% | 12.5% | 0.64 |
| ADBE | Thu Sep 10 (AMC) | ±5.7% | 8.1% | 0.71 |
| CPRT | Thu Sep 10 (AMC) | ±4.1% | 4.1% | 1.00 |
| KR | Fri Sep 11 (BMO) | ±3.9% | 4.7% | 0.82 |
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.
Last week's table went four for ten. DELL moved 15.8% against 10.1% implied, SNOW 16.6% against 10.5%, LULU 17.4% against 8.2% and PANW 9.3% against 8.0%. The two rows I flagged at the extremes both stayed inside: Broadcom, the cheapest name at 0.55, moved 2.7% against 5.2%, and HPE, priced at 1.56 times its history, moved 5.0% against 10.1%.
One vol concept: what a single day costs
Options do not price days individually, but you can read the price of one day off two adjacent expiries. Expected move grows with time, and the amount it grows between one expiry and the next is the market's charge for the sessions in between. When Friday's SPY expiry carries 9.5 vol and Thursday's carries 8.1, the extra has to live in Friday's session, which is why the CPI day works out to 0.73% while an ordinary day costs 0.44%. The same arithmetic on Oracle says the market charges about 8% for the report and roughly half a percent a day for everything else.
One terminal tip
Open Earnings and Events on ORCL. The past earnings table lists every gap back five years with the straddle price at the time, so you can see how often an 8% implied move would have paid across the four up and four down reports above. Free 7 day trial.
The CPI number lands at 8:30 on Friday. The Oracle and Adobe straddle results will be in next week's table.
Ryan
Educational content, not investment advice.