00:00 Speaker A
There is plenty of potential volatility drivers for options traders where dissecting what investors should consider when approaching their trades in the options pit sponsored by Tasty Trade. Amy Silverman, head of derivative strategy at RBC Capital Markets joining us now. Amy, it is great to see you. So you ask
00:16 Speaker A
an important question, a good question, as you always do, Amy. What is something you asked that the market is underpricing or mispricing? What’s the answer to that, Amy?
00:27 Amy Silverman
You know, we talk a lot about geopolitical volatility pot holes, but what is interesting is if you’ve looked at how the market has behaved, it’s been pretty well-behaved with regards to Venezuela, with regards to other geopolitical risks that have occurred.
00:41 Amy Silverman
One reason is because from an execution perspective, they’ve been okay. And so one question investors have asked us is, what if something occurs that is not well executed, that there is damage, that there is collateral? Then what do we see from volatility? Will it be less behaved in those circumstances?
00:55 Speaker A
Last time we talked, Amy, you talked about these trends of democratization, um, the rise, the popularity of retail option trading. How have those themes, those trends developed, Amy?
1:06 Amy Silverman
You know, they’ve been absolutely tectonic and especially in options, you know, there there’s so many different, uh, things you can point to is just the anniversary of the meme frenzy.
1:12 Amy Silverman
And one thing we talked about was we sort of saw in the Golden Silver complex, you know, an area that it’s somewhat unexpected, but you saw that exuberance, all that call buying, that momentum that demand, I call it the YOLO, the Momo and the FOMO. You know, you’re seeing this in pockets of unexpected areas. We only think that will continue further as retail becomes far more part of the picture of the stock market in general.
1:29 Speaker A
You mentioned those precious metals, gold and silver, Amy. So Baron’s had a piece today, metals are acting like the new meme stocks. That was the headline. What do the option markets? What what are they saying about these recent moves, Amy in those metals and and what do you see ahead?
1:46 Amy Silverman
Yeah, it it was really striking because, you know, we think of it more technically. We have quantitative indicators for instance, you know, how much call demand is there relative to put demand? What does that look like on percentile basis? Does that tell you there’s more chase or not? And what I think is really interesting is although we have had that drawdown, if you go back and look at the footprint,
2:04 Amy Silverman
it kind of tells you that people are still pretty exuberant on it. I think part of that, you know, there’s some valid fundamental reasons. It tends to be your knee jerk geopolitical hedge, um among other things, but that doesn’t mean that it is devoid from kind of the frenzy you saw uh during the meme frenzy. We still see that continuing. We still see that footprint specifically in the options market.
2:22 Speaker A
Let’s talk about the software stocks, Amy. Um, this has been front and center for investors. They are just getting mauled here with the threat of new AI tools. I think investors seem to be saying, listen, it’s moving so quick. I can’t choose winners and losers. so I’m just going to, I’m going to bail. I want out. If you look at the IGV, the software ETF, Amy, I mean, we we basically when you look at that chart, we we’ve done effectively a round trip here back
2:49 Speaker A
to the April lows. What what are options saying about software?
2:54 Amy Silverman
Yeah, it’s incredible. You know, some of the conversations I’ve had today, investors will admit to me, oh, you know, probably I and GV, probably software is oversold at this point. And then I say, okay, well, are you stepping back in? And they’re like, no. So that that gives you some sense of like where we are in terms of length and positioning. Right now the options, you know, are kind of meh, like the right the reason I describe it as that is it’s not giving you clear directionality.
3:20 Amy Silverman
It’s not saying people are ready to dip their toes in yet. I think when you get these knife down scenarios, when you get these huge divergences between tech volatility and volatility of everything else, people have learned to just kind of step away from the train and wait for the dust settles. I don’t think that means we won’t see directionality soon. We just haven’t seen it yet. I think we’re in the midst of the mayhem.
3:41 Speaker A
Oh, uh another one, Alphabet. Let’s talk about that, Amy. Um because that is reporting earnings obviously just after the bell today. Stock’s been, I mean, this is just a remarkable ride. The story of Alphabet is kind of. A year ago, Amy, if we were talking on this show, the story of an alphabet was, here comes Sam Altman and Open AI and Google search, this company’s bread and butter. Forget it. It’s over. Now look, I mean, we were up around 80% in the last six months, Amy heading into this report.
4:10 Speaker A
And and even now, I’ll just add, nearly 90% of analysts who are paid to tell you what to do with the stock. Even now, they say, yes, buy it here. What are options saying about Alphabet earnings?
4:21 Amy Silverman
I’ll tell you two things. First of all, it’s implying about a plus or minus 6% move. That’s like a little bit rich to the eight quarter historical average was about 5 and a half percent, but I’d say it’s actually pretty fair. And the second is usually you get directionality one way or the other. So either there’s sort of a lean towards bullish or bearish sentiment. I’d say that’s pretty low right now. So there isn’t a great demand for hedges, which I think dovetails uh with regards to kind of the more relatively bullish view across the board.
4:47 Amy Silverman
You know, Google is a name that can shift the narrative of the whole market. So we talk about how it’s just been a blood bath in IGV and in software, but you know, kind of the AI story can turn on a dime. We’ve really seen that, you know, last year with Deep seek, uh a few years before that with Nvidia and I think Google certainly has the power to do that if anything, simply because it’s such a heavy market concentration weight.
5:07 Speaker A
Finally, Amy, I’ll get you out of here on this. We got we got Alphabet today, then I got Amazon tomorrow. What do you see there?
5:16 Amy Silverman
So Amazon is a similar story. You know, I think for most people, especially because of it kind of sitting in the S&P consumer discretionary index, a lot of times it’s traded under, you know, a slightly different bucket. But same thing, outside of Google because it’s one of the Mag 7 names, it’s going to have the power to kind of change your narrative on the market. And I think one thing that’s important is we’ve seen this big divergence between tech volatility versus the volatility of everything else.
5:42 Amy Silverman
There’s actually been a decent amount of broadening out and people have been trading that essentially saying, you know, we’re finally getting this widening out that we’ve been looking for. However, I could see if these two names do well that you’re back into the trade that’s heavily concentrated. You’re back into the trade where how the meat is made is really only several names.
5:58 Speaker A
Amy, as always, so great to have you on the show. Thank you.
6:03 Amy Silverman
Thank you.
