TSLA IV 84th percentile

[Mikael 31]

Maybe a good opportunity to do a butterfly? Same idea as Kim's AAPL post on Seeking alpha:

 

http://seekingalpha.com/article/455021-apple-dissecting-the-butterfly-trade

 

 

[Ice101781 3]

they report earnings aug 7

[PaulCao 51]

TSLA is very volatile; http://www.ivolatility.com/options.j?ticker=TSLA:NASDAQ&R=1&period=12&chart=2&vct=

Hi, 

 

IV is high because HV is very high. I tried to short vol after TSLA's vol didn't dip after last earnings but instead spiked even higher, 

 

The reason for elevated vol. is a lot of controversy surrounding how much the company is worth; supporters think TSLA is going to be the next AAPL and pushing it to higher valuation while the value investors point that bulk of their profits comes from not even selling cars but trading carbon emission credits. Goldman gave it a low target price significantly lower than the current market price, but the market just seems to shrug it off, 

 

Normally I don't care about the highest IV, but instead the highest discrepancy of IV over HV: 

https://www.interactivebrokers.com/en/?f=daily_analysis&ib_entity=llc

 

Pick the 2nd tab: 'Implied Vol. vs Hist Vol', 

 

Best,

PC

[indiana*josh 59]

Normally I don't care about the highest IV, but instead the highest discrepancy of IV over HV: 

https://www.interactivebrokers.com/en/?f=daily_analysis&ib_entity=llc

 

 

I wonder if you could construct a profitable strategy out of taking vega positive positions (like straddle and strangles) in those stocks with the lowest IV/HV ratio.  Has anyone done any backtesting on this?  Does the IV/HV tend to revert to some more moderate value over time?  Naturally, you'd want to hold enough of them to reduce the risk of outliers.

[Mikael 31]

Paul that's a good point. I thought the IV spiked up because of Goldman giving it a price target of 85. However, the stock does seem to be very resilient and bounced back almost immediately. 

 

Ice i didn't realize earnings is coming Aug 7. perhaps there's a play here for a regular SO strat? A couple of cycles ago i looked at TSLA as well but there wasn't enough volume on the options, now it's a different story. 

[Skyfal107 2]

This is a stock that invokes religous fervour. With a 15 bn Market cap it basically makes batteries on wheels which it produces at a loss. It sells these based on upon the right to drive in the bus lane and federal tax credits. I think it is a fair bet to say that it is unlikely to be taken over  by Warren Buffet anytime soon. It has gone up like a skyrocket and will probably eventually come down like a stick. However, be very careful as it is often has incredibly high levels of short interest, historically up to 40 days , so it spikes on well orchestrated short squeezes usually precipitated by a series of +ve announcements . The IV is huge (and real) but my major concern in building sensible strategy is the bid/ask spread on the options which seems often to reflect the IV.   i wouldnt compare this to AAPL which is way more mature, this is akin to a biotech....

[Marco 223]

I agree with other posters that a butterfly on a stock like TLSA is tricky to say the least. I think you want somethng slightly more predictable than this stock ...

Where do you get the percentile for IV from?

[Mikael 31]

Marco, go to ToS, Trade Tab, Today's Options Statistics Drop down tab. 

 

It provides alot of useful information including current IV percentile. 

[PaulCao 51]

Hi, 

 

 

I wonder if you could construct a profitable strategy out of taking vega positive positions (like straddle and strangles) in those stocks with the lowest IV/HV ratio.  Has anyone done any backtesting on this?  Does the IV/HV tend to revert to some more moderate value over time?  Naturally, you'd want to hold enough of them to reduce the risk of outliers.

 

You want to be careful with that. More often than not, the market price do reflect the risk & reward. 

 

An example, during 2011, the IV of TIVO was extremely high while the HV was low - the reason, TiVo was losing rapidly its subscriber base as DirectTV and Comcast was building DVR into their cable-boxes. So there was a huge lawsuit from TiVo for patent infringement and licensing fees. The settlement of the lawsuit was up in the air and could have happened anytime during the first half of 2011. So you could sell TIVO option straddles and collect fat premium until the day when the announcement was going to happen, TIVO was either going to up or down. 

 

Another example is MMR, a natural gas company with huge high risk-reward drilling operation. So if there wasn't any drilling report coming out, stock was trading in range and option-sellers collect fat premium. However, if a positive or negative drilling report came out at an unspecified time, you are going to experience real volatility. 

 

Same thing goes for the other half of the stocks on that list, small-cap pharmaceutical facing FDA decisions. 

 

However, I should add that sometimes there are opportunities where the volatility of an catalyst event bleeds into a option whose expiration happens before the catalyst, e.g., pharma faces FDA decision in August but its vol for July options are still very volatile. Even then, there are risks with early report leaks, early earning guidance etc. 

 

Best,

PC 

[Gary 20]

I wonder if you could construct a profitable strategy out of taking vega positive positions (like straddle and strangles) in those stocks with the lowest IV/HV ratio.  Has anyone done any backtesting on this?  Does the IV/HV tend to revert to some more moderate value over time?  Naturally, you'd want to hold enough of them to reduce the risk of outliers.

 

just building on PaulCao's comment ... in many cases the lowest iv/hv are companies being acquired. long story short you have to weed out a bunch of names before you can really start the analysis based on this metric.

[Gary 20]

Marco, go to ToS, Trade Tab, Today's Options Statistics Drop down tab. 

 

It provides alot of useful information including current IV percentile. 

 

Good observation Mikael. I recently discovered this section (the guys on tastytrade were talking about it) and it provides some really cool stats.