Options IV and HV Rank Template
$SNAP rose to the top of the Options IV and HV Rank template on Friday indicating that the 30 day implied volatility is the lowest it has been in a year. That means options premiums are the cheapest they have been in a year and that the 30 day expected move is the smallest it has been in a year.
Options Analysis Chart
Looking closer at the Options Analysis Chart Layout in EdgeRater you can see how the implied volatilities of 12 different time periods all have hit a low.
This means options traders are not bidding up options prices and that they expect the next period in $SNAP to be less volatile than any time over the last year.
But Are They Correct?
The current 30 day Expected Move is between +2 and -1.85. Theoretically expected move bands predict a 1 standard deviation probability of price ending up between upper and lower limits. 1 standard deviation indicates a 68% probability.
When looking back over the last year at predicted expected moves and actual moves in the underlying you can see from the chart that SNAP has spent 68.25% of the time within these bands which conforms very well to the theoretical probability.
So, this is one to watch for the next 30 days. If you want to purchase options in $SNAP they are better value than any time over the last year and the Historical Volatility over the past 30 days is in the 82nd percentile. Technicians will note that SNAP is also running into a downward sloping trendline and is struggling to overcome the tall red candle of 8 days ago.
Trading is an exercise in probabilities and looking at Implied Volatilities and expected moves gives you some good insight into upcoming price movement.
EdgeRater has an excellent template to allow quick identification of low or high IV Ranks and to compare to Historical Volatility (HV). EdgeRater also allows further analysis with the Options Analysis chart layouts.
Before you make a trade based on technical analysis, why not check out what the options market thinks is going to happen. In the case of $SNAP, they have been correct exactly as much as expected!
Have a great trading week,
Founder and CEO, EdgeRater LLC
PS. Take the free 14 day trial of EdgeRater to see what you are missing!