Exploring the world of trading options unveils a metric that shines a light on market dynamics known as the Implied Volatility Percentile (IV Percentile).
IV Percentile, a facet of implied volatility measurement, compares current implied volatility to its historical range for a specific stock.
When we talk about a stock’s IV percentile, we gauge its current implied volatility against past levels, presenting it as a percentage from 0-100%.
An IV percentile of 0 connotes a stock at its lowest historically implied volatility, whereas a 100% IV percentile suggests the stock is currently experiencing the highest implied volatility levels.
Historically, a surge in implied volatility often heralds an upcoming earnings announcement, igniting price movement in stocks. To unearth stocks with elevated IV percentile, we delve into the world of the Stock Screener.
Finding High Volatility Gems with the Stock Screener
Amidst market tremors and a flurry of earnings reports, we unearth a cluster of stocks showcasing a high IV percentile.
By setting specific filters in the Stock Screener, such as a Total Call Volume of 5,000, Market Cap exceeding 40 billion, and an IV Percentile greater than 90%, we unearth a list of stocks.
The resulting roster is led by luminaries like Nvidia, Apple, Tesla, Amazon, Intel, Palantir Technologies, Advanced Micro Devices, Microsoft, Uber Technologies, and Bank of America.
Within this screen, a total of 94 stocks meet the stringent criteria, offering a plethora of opportunities for traders seeking high volatility plays.
Deciphering the Utilization of IV Percentile
When the IV percentile traverses lofty territories, delving into trades like iron condors, short straddles, and strangles is often a judicious maneuver.
Keeping an eye on impending earnings releases is also crucial as stocks tend to experience sizable movements post-earnings announcements.
Unveiling the Iron Condor Screener
Let’s employ an iron condor screener for the aforementioned high IV percentile stocks and analyze the outcomes.
Upon scrutinizing Nvidia in detail, initiating a trade with the September 20 expiry entails selling the $60 put and buying the $40 put, followed by selling the $160 call and purchasing the $180 call.
The condor price at $1.09 implies a credit of $109, with a maximum risk of $1,891 and a profit potential of 5.7%, bearing a probability of success at 91.6%.
The profit zone spans from $58.91 to $161.09, calculated by incorporating the premium received to the short strike prices.
The breadth of the profit zone is truly remarkable in this context.
In navigating this volatile market landscape, traders venture forth with caution and diligence, cognizant of the risks that options entail, reminding themselves of the inherent speculative nature of options trading.
As the wheels of financial markets continue to spin, remember to engage in thorough due diligence and seek counsel from financial experts before embarking on investment endeavors.
