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Volatility Should Pick-Up Following Tomorrow’s Options Expiration

Volatility Should Pick-Up Following Tomorrow’s Options Expiration

Posted November 19, 2021 at 9:10 am
Michael Kramer
Mott Capital Management

Stocks – NVDA, DIS, AMZN, MOS

Macro – SPY, IWM

Look’s really can be deceiving, with the S&P 500 finishing up 34 basis points. The session wasn’t strong, with decliners leading advancers, the S&P 500 EW (RSP) finishing down 37 bps, and the Russell down almost 60 bps.

The interesting thing about the Russell was how it closed right on support around 2,360. I don’t like to talk about the Russell much anymore because of what has happened to it, due to stocks like AMC and Gamestop taking it over and names in the most shorted index running the show. But if the Russell cannot hold this break out, it would be a bad sign of things to come. Even more interesting is that the RSI is sitting right on the uptrend.

Russell 2000

Additionally, we see the percentage of stock above their 50-day moving average breaking down and leading the way lower for the index.

Stocks Above 50-Day Average

The actual S&P 500 cash market closed right at 4,704, just close enough to the 4,700 strike price for tomorrow’s options expiration on the opening. Once that expiration pass, this tight trading range we have witnessed since the beginning of November will cease to exist; gamma levels drop, the market will open, and volatility will return. It doesn’t mean the market will go, nor up. It just means that the trading band will grow wider.

Nvidia (NVDA)

Nvidia broke higher today following its quarterly results last night. The stock wasn’t able to pass the previous highs. The RSI is still negative, and the lower gap needs to be filled. I think $265 is still a reasonable place for the stock to settle.

Nvidia

Disney (DIS)

Disney looks like it may have completed filling the gap today at $154. I saw a lot of bullish options betting on this one yesterday, and like Nvidia, Disney has a gap to fill. I think the stock moving to $168 seems reasonable.

Disney

Mosaic (MOS)

Mosaic was another stock with a ton of bullish activity at the start of the week. The stock is holding on to the uptrend. For now, a push higher to $43 seems reasonable as long as the uptrend holds.

Mosaic

Amazon (AMZN)

Amazon was up today; I couldn’t tell you why. The stock has been dead money now for over a year. I know people think a range-bound stock is a winner; it isn’t. The stock has been up less than 5% since August of 2020. Could it break out and move to an all-time high, maybe. The company just guided down the fourth quarter out and told everyone their cost are rising; these should be a negative for the stock. It certainly would not work for me. Besides, at this point, it has filled the gap and now successfully retested the broken uptrend. I still believe this is a stock going lower, not higher; when it happens can’t tell you.

Amazon

Originally Posted on November 18, 2021 – Volatility Should Pick-Up Following Tomorrow’s Options Expiration

Disclosure: Mott Capital Management

Mott Capital Management is the portfolio manager for one portfolio offered by Interactive Advisors. Interactive Advisors clients do not invest directly with the Portfolio Managers like Mott Capital Management, and the Managers do not have discretionary trading authority over Interactive Advisors client accounts. The Portfolio Managers on the Interactive Advisors platform simply license their trade data to Interactive Advisors, which then allows its clients to have the same strategy and trading decisions mirrored in their accounts if the Portfolio is in line with their risk score. Portfolio Managers like Mott Capital Management implement their trading philosophy and strategy without knowing the identity of Interactive Advisors’ clients or taking into account these clients’ individualized circumstances.

Mott Capital Management has entered into a Portfolio Manager License Agreement with Interactive Advisors pursuant to which it provides trading data IA uses to offer a portfolio to its investment advisory clients.  Mott Capital Management is not affiliated with any entities in the Interactive Brokers Group.  

Interactive Advisors is an affiliate of Interactive Brokers LLC.

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