MTM Options Trader Newsletter - Implied Volatility Can Be a Bull Put’s Friend

This Week in the Market The market moved lower this past week, with Nasdaq being the most bullish, as it did its best to close in positive territory but ultimately failing. A gap higher on Friday was met with selling to close out the week. The three major indexes are all trading well below their 50-day moving averages with the Dow closing below its 200-day moving average on Friday. A non-bullish bias continues to make sense as potential resistance levels continue to hold when tested over the last couple of weeks. Implied volatility and option prices continue to be elevated with IV skews between expirations being spotted more frequently than a month ago. Long time spreads love that! At the time of this writing, nothing had been solved to end a government shutdown scheduled to happen on Sunday if no agreement had been reached by then. It could be an interesting open on Monday so buckle up. As far as other economic reports go, there are several including the latest September jobs report due Friday before the open. Have a healthy, safe and splendid weekend and don't forget to work on your trading plan too!

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Implied Volatility Can Be a Bull Put's Friend Implied volatility has been predominantly low up until this recent sell-off in the market toward the end of September. With this sudden drop, IV levels and option prices have surged higher to levels not seen since late May This increase gives an edge to option sellers, and the potential decrease, can help them as well. Let's take a look. Implied Volatility Implied volatility (IV) is the estimated future volatility of a stock's price. More often than not, IV levels increase during a bearish market and decrease during a bullish market. IV increases push option prices higher and vice versa. The reason is that a bearish market is perceived as riskier than a bullish market. Continue Reading … MTM Watchlist Here are a few trade ideas that we will most likely be looking at this coming week: SPY – With the market continuing to look weak, bear call spreads have been profitable around resistance levels. More bear calls will be modeled out unless a rally is in the cards then bull puts around potential resistance levels will then make sense. META – Iron condors have been fantastic for this stock as it continues to hang around its 50-day moving average. Additional iron condors will be looked at as well as additional calendar spreads too. NFLX – The stock has continued to drop and looks like its 200-day moving average might be the next stop. Potential put calendars and bear call spreads will be modeled out.

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