We have a very interesting week forming with news out of the Middle East, continued bullish behavior from China, a VP debate, and Non-Farm Payrolls. All of that means potential for volatility!
Understanding volatility as an input to options pricing is crucial, so if you want to get a better feel for how a professional trader evaluates volatility, make sure you don’t miss my webinar on Tuesday October 8th at 4:30 PM ET. You can sign up here.
With that, let’s get to the markets!
The biggest note for me on the backs of the news this week is that we are seeing a familiar pattern with tech, and it can be seen via the ETF QQQ:
Pullbacks into and after Non-Farm Payrolls are becoming a trend. Nervousness can cause rotation, and we’re certainly seeing a flight to safer bets that may not be as widely impacted by Non-Farms Payrolls.
There are winning sectors in this market, and I’m looking for names that haven’t had a drastic pullback off Non-Farms Payrolls in August and September. One in particular caught my eye, and that’s Accenture (ACN):
ACN has been in a general bullish trend and pulled back to the 200-Day Moving Average prior to earnings on September 26th. Now, it’s pushing near highs and a possibility of a breakout after bullish earnings! The best part for me is that this technical move based upon strong fundamentals comes at a discount due to the drop in implied volatility:
*From LiveVol Pro
The earnings announcement dropping implied volatility to lows while the market is driving the VIX higher. And I can get into this name now instead of gambling on earnings. In fact, depending on the strike selection, I can get into call options at a cheaper price than I would have prior to earnings. Let’s just look at the October 18th, 2024 $360 calls as a prime example of the impact of passing time and dropping implied volatility:
*From LiveVol Pro
With the stock trading $15 lower a week ago, these calls were more expensive than they are today as they are down from about $3 to about $2.35. That’s the benefit of knowing how volatility can impact the value of an option. While that may not be the very best option to buy today, it’s a prime example of how much volatility matters to the options market. Make sure you sign up for my webinar next week to learn more about incorporating volatility analysis to options trades (and you’ll get free giveaways to go along with it just for signing up)!
And if you’d like to get a list of ideas and setups just like this that could be of interest for trading opportunities, check out my Outlier Watch List.
And as always, please go to http://optionhotline.com to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades. And if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@optionhotline.com
Recent Comments