How to use performance period for options trading.
Implied volatility of options is the expected price change of a certain stock on performance day. Market traders can use it to speculate the value of options. In addition, looking back at the stock price performance on performance days can also determine its specific trading patterns or rise and fall situations.
Options strategies based on volatility.
When options are overvalued and stock prices are still within the expected range, arbitrage can be carried out based on the short-term volatility of IV crush. Common short-term volatility strategies include iron condors, selling straddles, and selling wide straddles.
1, in the past week, it fell by more than 2%, and the volume of options on Friday decreased slightly to 4 million contracts, with a call ratio dropping to 56%; on the open options chain, the call with an expiration date of this Friday and a strike price of $110 was the hottest, with a trading volume and open interest of nearly 0.09 million contracts. $NVIDIA (NVDA.US)$
Earnings release date: after market close on August 28th.
Performance forecast: Q2 revenue of $28.712 billion, a year-on-year increase of 112%; EPS of $0.6, a year-on-year increase of 143%.
The current implied volatility of Nvidia is ±10.9%, indicating that the options market is betting on a single-day price change of 10.9% after the performance announcement. In comparison, the stock price change after the previous four quarters' announcements was approximately 7.1%. The market expects greater volatility this time.
In the past 12 performance days, Nvidia had a high probability of rising, with a probability of 75%. There was a 42% probability that its volatility exceeded market expectations, and the average return rate was +6.2%.
From the perspective of option volatility skewness, the current market tends to be bullish on Nvidia. In the options chain last Friday, the most active option among the unexpired options was the call with a strike price of $130 expiring this Friday, with a trading volume of over 0.076 million contracts and an open interest of 0.12 million contracts.
3, the strong performance continued after the earnings report. The volume of options on Friday surged to 0.3 million contracts, and the call ratio increased again, to around 70%. On the options chain, the call with a $40 strike price expiring this Friday was sought after, with a trading volume of 0.034 million contracts and an open interest of 3,800 contracts. The option recorded a 100% increase on the day. $Broadcom (AVGO.US)$
Earnings release date: After the market on September 5th.
Performance forecast: Q2 revenue of $12.959 billion, a year-on-year increase of 46%; EPS of $0.56, a year-on-year decrease of 27.6%.
The current implied volatility of Broadcom is ±8.9%, indicating that the options market is expecting a daily price change of up to 8.9% after the earnings release; in comparison, the price change after the previous four quarters' earnings release was about 6.8%, and the market expects the stock price to be more volatile this time.
In the past 12 earnings days, Broadcom has had a high probability of rising, at 75%, and in the past 2 earnings days this year, the stock price has shown an increasing trend of volatility, closing at -7% and +12.3% respectively.
Looking at the skewness of option volatility, the current market sentiment towards Broadcom is slightly bearish. Checking the options chain with the largest open interest reveals that the call options with expiration on September 20 and strike prices of $160 and $150 have the most open contracts, with 0.029 million and 0.026 million contracts respectively.
Earnings release date: September 5th, before market open.
Performance forecast: Q2 revenue of $17.38 billion, a 98% year-on-year increase; a loss of $2.33 per share, a narrowed year-on-year loss.
Nio Inc's current implied volatility is ±11.9%, compared to only 3.1% in the previous four quarters after the earnings. However, the probability of the options market overestimating Nio Inc's stock price volatility is about 100%, indicating that the current options value of Nio Inc may be overestimated.
Out of the past 12 earnings days, Nio Inc has a high probability of decline at 67%, with a maximum increase of +11.8% and a maximum decrease of -9.4%.
Performance release date: After market on September 4th.
Performance forecast: Q1 revenue for the 2025 fiscal year is $86.94 million, a 20% year-on-year increase; a loss of $0.56 per share, roughly in line with the same period last year.
C3.ai's current implied volatility is ±14.4%, compared to a 16.7% stock price change in the previous four quarters, indicating that the current option value is slightly undervalued.
In the past 12 earnings days, the probability of C3.ai's decline is higher at 58%, with a maximum increase of +33.6% and a maximum decrease of -19.3%. The post-earnings volatility in the past four earnings days has been in double digits, with equal probabilities of increase and decrease, reporting -12.2%, -10.8%, +24.5%, and +19.4% respectively.
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Disclaimer
This content does not constitute an offer, solicitation, recommendation, opinion, or guarantee of any securities, financial products or instruments. The loss risk of buying and selling options could be substantial. In certain circumstances, you may suffer losses exceeding the amount initially deposited as margin. Even if you set up backup instructions, such as stop loss or limit instructions, losses may not be avoided. Market conditions may render such orders impossible to execute. You may be required to deposit additional margin in a very short period of time. If the required amount cannot be provided within the specified time, your open contracts may be closed. However, you are still responsible for any shortfalls in your account arising from this. Therefore, before buying or selling, you should research and understand the options, and consider carefully whether such trading is suitable for you based on your financial situation and investment objectives. If you buy or sell options, you should be familiar with the exercise of options and the procedures at expiration, as well as your rights and obligations when exercising an option or at expiration.
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