As NDX IV stays elevated Big Tech IV's Getting Crushed
Today, as I was preparing to be on Fast Money's Volatility Playbook (you can catch the replay here), I took notice of how hard implied volatility had been sold off in major tech firms right after they made some huge stock moves.
AAPL is back near a 52 week low IV:
So is GOOG:
So is IBM:
On their own merits, one could make an easy argument to buy premium in any of these stocks. The AAPL straddle is about 21 dollars; the stock has moved 90 in the last few weeks. GOOG just popped 60.00 dollars on earnings and moved 7 dollars today, yet its straddle is only 26 bucks. IBM, sitting near all time highs and has a straddle price of less than 7 dollars; it was trading lower than that last week!!! Personally, if AAPL or GOOG IV hit the 52 week low below 21% and 18% respectively. I just do not see a scenario where straddles at IV levels that cheap lose. Other names that seem cheap are INTC, GS, KO, CMG and AZO.
At the same time, NDX IV is not anywhere near a 52 week low:
If anything NDX volatility is somewhat elevated. Without getting to deep into it, I think there has to be a trade swapping INTC, AAPL, GOOG and MSFT VS the NDX, some sort of long vega and premium in the individual names, while selling premium in NDX. The idea would be to have little to no NET greeks and simply play the IV differentials. The idea is that you create a synthetic index of the major stocks in NDX buying premium in each, the bigger the piece of the NDX the more one buys (although I would certainly buy more of one if it was extra cheap). Then sell the NDX volatility itself against the portfolio.
This would be somewhat similar to the old 1-5 straddle swaps I used to talk about on Option 911 (buying or selling OEX vs. SPX). The difference would be that there is likely somewhat more systemic risk in the trade than in the 1-5 swap.
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