Joby Aviation, Inc. (JOBY) is a maker of an electric aircraft that is designed to become an air taxi vehicle. The FAA just created new operating rules that provided another step toward this type of vehicle realizing its purpose. The stock jumped 12.57% yesterday on the new FAA rules. Beyond the FAA rules, Toyota Motor Corp (TM) has taken a substantial stake in the air taxi company. Recently TM added $500 million to increase their stake.

From an options trader’s perspective, the three-month Implied Volatility (the lower blue line in the time series chart below) is rising. The rising implied volatility shows us that demand for options is pushing options prices into expensive territory. This tells us that our option strategy should include selling expensive options.

This Volatility Term Structure  chart for JOBY is inverted. That is, shorter-term options are more expensive than longer-term options. By going out to January’s option expiration, we can reduce the relative cost of our position and buy time for the stock to make a big move.

This MDM graph  compares the modeled expected distribution for future stock prices (the orange line) with the actual distribution of JOBY’s share prices over the last year (the blue histogram). You can see that the actual stock movement does not make big moves as frequently as current options prices expect. This graph tells us options for the January 17th expiration are a little bit pricey.

This Volatility Cone  chart for JOBY compares implied volatility expectations for each term to the historical volatility for that same term. The blue line shows the average historical volatility;  purple lines show each HV measure’s highest high and lowest low over the past year. You can see that all terms are above average. This graph confirms that the demand for JOBY options is high and options are  on expensive.

JOBY is trending in the news and on social media. Social mentions are up 2,600% in the last 24 hours after FFA rule changes opened a path forward for the aircraft toward air taxi services. Demand for options is high, and options prices are expensive. As a result, our option strategy will involve selling options to reduce our cost and give us a greater probability advantage.

To get the specific details and prices on today’s trade ideas, be sure to read today’s ODDS Online Daily Option Trade Idea. 

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Thank you,

Don Fishback