In the Media
Tuesday, October 20th 2020
Matt Amberson Joins Jill Malandrino Of Nasdaq TradeTalks
Matt Amberson of ORATS joined Jill Malandrino of Nasdaq TradeTalks to discuss NDX call buyers, the election and options, and earnings.
Summary
Matt Amberson of ORATS joined Jill Malandrino of Nasdaq TradeTalks to discuss the NDX's implied volatility measurement, call buying in NDX components, election effects on options and earnings. The market has seen unprecedented times with IV going up with the market 25% of the time in the last 2 months. ORATS isolates the constant maturity 5 delta calls where most of the action has been, and the election day options are implying a 3% earn move. Last season, the straddles did poorly for options buyers, but this season, the implied earnings move is down, which may be an opportunity for options buyers.
Matt Amberson, Principal at ORATS, joined Jill Malandrino of Nasdaq TradeTalks to discuss VOLQ implied volatility measurement of the NDX, call buying in NDX components, election effects on options and earnings.
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These are unprecedented times. Since 2006, NDX goes up and vol goes up only about 10% of the time but in the last 2 months IV has gone up with the market 25% of the time. Recently, when vol and the market go up together call slope has increased 75% of the time. Compare that to a 50/50 chance usually.
We see massive OTM call buying. ORATS isolates the constant maturity 5 delta calls and this is where most of the action has been. The large amount of short calls for market makers creates a 'gamma effect' where as the market goes up the market makers need to buy. Gamma effect happens going down too and exacerbates moves, where gamma acts as an accelerant to volatility. Market makers can't just cover their deltas, gamma changes the delta, and that is what causes these issues.
The election day options are implying a 3% earn move. Back on 9/1, there was an implied 4.2% move, and on 9/23 there was an implied 4.5% move.
Earnings: we measure how well options straddles have done around earnings and last season the straddles did very poorly for options buyers. This season, the implied earnings move is way down. Perhaps this is an opportunity for options buyers.
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