Investors embarking on the treacherous landscape of options trading often rely on the enigmatic Implied Volatility Percentile, a benchmark that casts light on the prevailing mood of the market. This metric is a yardstick whereby the current level of implied volatility in a stock is juxtaposed against its historical range of implied volatility. Picture this: Apple, for instance, undergoes the scrutiny of IV percentile, wherein its present implied volatility is scrutinized against its past implied volatilities. The outcome? A numerical figure on a scale from 0 to 100%; 0 signifying a stock basking in the tranquility of low implied volatility during the retrospective period, while a figure of 100 signifies a stock engulfed in the storm of high implied volatility.
Enter an earnings announcement, and suddenly the clouds of uncertainty darken, casting a foreboding shadow of elevated implied volatility. For the discerning investor seeking stocks adorned in the regalia of high IV percentiles, the Stock Screener stands as a beacon.
Decoding High Volatility Stocks
As volatility scales the heights akin to a fearless mountaineer, spurred by a frenzied earnings season, numerous stocks are flaunting a lofty IV percentile. With judicious filters in place, we can cull out stocks parading with a high implied volatility percentile:
- Total Call Volume 5,000
- Market Cap greater than 40 billion
- IV Percentile greater than 90%
This criteria yields a list of illustrious stocks, marching in descending order of IV percentile:
Nvidia, Apple, Tesla, Amazon, Intel, Palantir Technologies, Advanced Micro Devices, Microsoft, Uber Technologies, Bank of America.
In total, a treasure trove of 94 stocks immaculately aligns with this stringent scan criteria, promising a cornucopia of opportunities for the astute investor.
Mastering IV Percentile
Amid the tumult of high implied volatility percentile, the prudent investor often veers towards short volatility trades such as iron condors, short straddles, and strangles. Keeping a watchful eye on imminent earnings dates is sage advice, for stocks are known to pirouette wildly post-earnings announcements.
Iron Condor: The Untamed Beast
Embarking on an expedition of iron condors for the aforementioned stocks unfurls a trove of possibilities. Let’s gaze upon the grandeur of NVDA:
A delve into the annals of NVDA reveals a daring strategy. Venturing forth with the September 20 expiry, the adept trader unveils a symphony of trades – selling the $60 put and buying the $40 put. On the calls front, selling the $160 call and buying the $180 call.
The condor, priced tantalizingly at $1.09, promises an influx of $109 into the trader’s treasure chest. With a calculated risk ceiling of $1,891, and an enticing profit horizon of 5.7% coupled with a staggering probability of 91.6%, the profit realm unfurls between $58.91 and $161.09. Indeed, a profusion of riches awaits within this expansive vista of gains!
Bon voyage, intrepid traders, amidst the tempestuous seas of this volatile market. Remember, though, the siren song of options beckons with perilous allure – potential for a complete erosion of investments. This missive of enlightenment serves as a beacon of knowledge, not as a directive for trade. Heed the counsel of your financial guardian ere you traverse the tempestuous waters of investment.