Volatility is back towards the lowest levels we have seen in 2025 with the VIX Index closing at 16.35 on Wednesday. When volatility is low, options become cheaper, so today we’re looking for stocks with a low IV Percentile which could be good candidates for a Long Straddle trade. More News from Barchart First, let’s find stock with a low IV Percentile using the Stock Screener and the following parameters: A screenshot of a computer AI-generated content may be incorrect. This gives us the following res ...

Market Overview - The Dow Jones Industrial Average decreased by 0.1%, while the S&P 500 fell by 0.50% and the Nasdaq Composite dropped by 1%, marking its worst performance since mid-December [1] Geopolitical Concerns - Ongoing geopolitical tensions in regions such as Iran, Greenland, and Venezuela, as well as domestic issues in the U.S., are causing trader concerns [1] Supreme Court Expectations - Investors were anticipating a ruling from the Supreme Court regarding tariffs, which did not occur, contributing to market unease [1] Options Activity - There were 1,245 calls and puts with volume-to-open-interest ratios of 1.24 or higher, with notable activity in Shopify, Starbucks, and Pinterest, all of which are considered long-term investment opportunities [2] Shopify Options Analysis - Shopify exhibited four unusually active options with volume-to-open-interest ratios between 1.47 and 4.67, indicating potential trading opportunities [3] Multi-leg Trade Strategies - A Long Strangle trade involving Shopify's January 23 options includes buying a $170 call and a $155 put, anticipating significant stock movement in either direction over the next nine days [4] - The net debit for this trade is $420, representing 2.67% of the share price of $157.61, with a maximum loss occurring if the share price is between $174.20 and $150.80 at expiration, which has a probability of 44.8% [5] Expected Stock Movement - The expected price movement for Shopify over the next nine days is 5.07% or $7.98, with a higher likelihood of profiting from a downside move [6] Long Straddle Strategy - A Long Straddle strategy is also considered, where the strike price for both the call and put is the same, with a net debit of 20.41% of the stock price at $3,215 [7]

Company Overview - Pfizer's stock has seen a significant decline, down 59% from its all-time high of $61.71 in 2021, currently struggling to maintain levels above $20 [2] - The company has a market capitalization of $144 billion [3] Options Activity - On March 20, Pfizer's $29 put option exhibited the highest unusual options activity with a Vol/OI ratio of 210.16, indicating a volume of 30,263 against an open interest of 144 [1][3] - The options activity suggests that there is significant interest in the stock, with the March 20 $29 call option also showing similar volume, indicating a potential Long Straddle strategy [5] Historical Context - Pfizer's 30-day average options volume is 142,695, with the recent activity being 1.39 times that amount, marking the highest volume since December 17 [6] - The highest options volume in the past three months reached 890,898, occurring shortly after the company reported its Q3 2025 results on November 4 [7] Earnings Guidance - Pfizer reaffirmed its 2025 guidance on December 16, projecting adjusted earnings per share of $2.90 at the midpoint, a decrease from $3.08 in 2025 [8]

Core Insights - Volatility has decreased, with the VIX Index closing at 14.91, indicating a favorable environment for options trading [1] - Stocks with low implied volatility (IV) percentiles are being targeted for potential long straddle trades, with Airbnb Inc (ABNB) identified as a notable candidate [2] Options Strategy - A long straddle is an advanced options strategy aimed at profiting from significant price movements in either direction or an increase in implied volatility [3] - The strategy involves purchasing both a call and a put option, requiring the trader to pay two premiums upfront, which represents the maximum potential loss [3] Trade Setup - For Airbnb, the proposed long straddle involves buying a $135-strike call and a $135-strike put, with a total premium of $1,955, which is also the maximum loss [5] - The lower breakeven price is set at $115.45, while the upper breakeven price is at $154.55, indicating the price range within which the trade will be profitable [5] Profit and Loss Considerations - The potential profit from this strategy is theoretically unlimited, but the trade incurs daily losses due to time decay if no significant price movement occurs [4] - A stop loss is typically set at around 20% of the capital at risk, approximately $390, with a profit target of around 40% [7] Conditions for Long Straddle - Both options in a long straddle must share the same underlying stock, expiration date, and strike price [8]

Market Volatility - Recent market volatility has decreased as the potential for more rate cuts is being digested, with the VIX Index closing at 17.24 after reaching a high of 28 earlier in November and briefly dropping below 16 this month [1] Long Straddle Strategy - A long straddle is an advanced options strategy aimed at profiting from significant price movements in either direction or an increase in implied volatility, requiring the purchase of both a call and a put option [2][6] - The maximum loss for this strategy is the total premiums paid for the call and put options, while the potential profit is theoretically unlimited, although daily losses may occur due to time decay if no significant price movement happens [3] Long Straddle Example - An example of a long straddle on KO involves buying a $72.50-strike call and a $72.50-strike put with a premium of $323, which represents a maximum loss, while the maximum profit remains theoretically unlimited [7] - The lower breakeven price for this trade is $69.27 and the upper breakeven price is $75.73, with the premium paid being 4.49% of the stock price and an estimated probability of profit at 44.2% [7]

Core Viewpoint - The stock market is experiencing increased volatility, with the Cboe Volatility Index rising above 20 for the first time since June, indicating a shift in market dynamics [1] Bond Market Insights - Bond volatility has also increased but remains relatively low; investors may consider a long straddle strategy in the iShares 20+ Year Treasury Bond ETF (TLT) to capitalize on potential price movements [1][2] - The iShares ETF is sensitive to yield changes and long-term credit conditions, making it a strategic choice for investors anticipating volatility [2] Options Strategy - Investors can establish a long straddle by purchasing both 90 call and 90 put options expiring on November 21, with the cost of this position being approximately $3.15 per contract, leading to a maximum loss of $315 if the fund closes at 90 on expiration [3] - Significant price movements in long-term bond yields could lead to substantial gains, with break-even prices at approximately 86.85 on the downside and 93.15 on the upside [4] Market Conditions - Long-term bond investors have faced challenges due to high inflation and rising global debt levels, which have led to a decline in the iShares fund's value by about 50% from 2020 to mid-2025 [5] - Recent fears of recession and early signs of labor market weakness have attracted buyers back to long-term bonds, with the ETF's shares rebounding from a low of 83.30 in late May and surpassing both 50-day and 200-day moving averages [6]

Group 1 - The VIX Index has closed at 16.28, indicating a return to low volatility levels not seen since 2025, which makes options cheaper and presents opportunities for Long Straddle trades [1] - Arm Holdings (ARM) is identified as a stock with potential for significant movement in either direction due to its current negative Gamma [2] - A Long Straddle is an advanced options strategy that profits from large price movements or increased implied volatility, requiring the purchase of both a call and a put option [4] Group 2 - The Long Straddle trade on ARM involves buying a $140-strike call and a $140-strike put, with a total premium of $2,810, which represents the maximum loss [6] - The theoretical maximum profit from the Long Straddle is unlimited, but the position incurs daily losses due to time decay if no significant price movement occurs [5] - The lower and upper breakeven prices for the trade are $111.90 and $168.10, respectively, with estimated breakeven prices at the end of October around $122 and $157 [6]