Volatility Kings First Quarter 2021

Review NotesWhile first-quarter reporting began last week, they really get rolling this week so the time has come once again to update our Volatility Kings™ list of companies that have a regular tendency to experience increasing option implied volatility as their quarterly reporting dates approach.

With the S&P 500 Index making multiple new highs volatility continues drifting lower, as option volume increases. Many new companies appearing in the top 200 by options volume for the first time makes it more difficult to find those with a regular tendency to experience increasing implied volatility ahead of reporting. In addition, unprecedented speculative activity dramatically increased the implied and historical (realized) volatility of a few widely followed hot stocks. 

The degree of uncertainty for upcoming reports may not be comparable to previous quarters. While some companies are on the list one quarter and not the next, others seem to remain on our list quarter after quarter. Focused on earnings, others with high-implied volatility due to takeover speculation, vaccine news, FDA announcements, or other extraordinary events, are excluded, along with those lacking sufficient liquidity due to low option volume described below.

In order to focus on those with the greatest options volume and best liquidity, the weekly options volume requirement is set at those with a weekly average of greater than 35K contracts. The objective is to find those stocks with sufficient options liquidity and therefore reasonable bid/ask spreads to use for various multiple leg strategies, such as Calendar Spreads, Butterflies, Iron Condors, Straddles, and more.

The selection process begins at our daily listing of found in the Rankers and Scanners section of Review Notes our home page about one-half way down the page, at the top left. Individual stocks with options volume less than 35K are excluded along with those with prices less than 10 since when prices are too low there are usually not enough option strike prices or liquidity for attractive option strategies.
Many IPOs and SPACs appeared in the top 200 list making the selection process more subjective. Sorted by nearest reporting dates, the list follows.

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Disclaimer: IVolatility.com is not a registered investment adviser and does not offer personalized advice specific to the needs and risk profiles of its readers.Nothing contained in this letter ...

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