Week Ahead: Geopolitical Tensions & Earnings Volatility — Oct 26

Last Week Recap

Geopolitical tensions dominated the headlines, with Saudi Arabia intercepting missiles and drones from Iran-backed Houthis, escalating regional supply risks (CNBC). Meanwhile, unrest in France saw large-scale protests, adding to European instability (Seeking Alpha). In the U.S., political and economic concerns ahead of the midterms were highlighted, with investors looking for clarity from the Fed (MarketWatch).

The Setup This Week

SPY closed at 759.97, with support at 756.64 and resistance at 763.52. QQQ is at 704.4, with support at 701.9 and resistance at 709.53. IWM is trading at 275.75, with support at 274.52 and resistance at 276.9. The VIX closed at 19.45, indicating a moderate level of fear in the market. The term structure remains in contango, suggesting that longer-term volatility expectations are lower than current levels, which often indicates a stable market outlook.

Catalysts on the Calendar

This week, keep an eye on geopolitical developments, particularly in the Middle East, and the ongoing protests in France. Economic data releases are sparse, but any unexpected announcements could impact market sentiment. Additionally, watch for any statements from the Federal Reserve that might address investor concerns about economic policy.

Options Flow & IV Map

IV-Rich Names (Sell Premium):

• PLTR: IV rank 81, suggesting premium-selling strategies like short puts or credit spreads are favorable.
• QQQ: IV rank 75, in premium-selling territory; consider strategies like iron condors.
• GOOGL: IV rank 65, indicating a preference for premium-selling strategies.

IV-Cheap Names (Buy Premium):

• AVGO: IV rank 19, ideal for debit structures such as long calls or puts.
• NFLX: IV rank 16, suggesting opportunities for buying premium.
• TSLA: IV rank 9, extremely low, suitable for debit spreads or long options.

Index IVs show SPY with an IV rank of 52, QQQ at 75, and VIX at 40, all indicating a preference for premium-selling strategies across major indices.

Trade Ideas

1. Moderna (MRNA) Credit Put Spread

   • Thesis: With healthcare in focus due to recent headlines (Seeking Alpha), and MRNA's IV rank at 96, selling premium is attractive.
   • Structure: Bull Put Spread, short 180 put, long 170 put, expiry 30 days out.
   • Max Risk: $1,000 per spread.
   • Profit Target: 50% of credit received.

2. iShares MSCI Brazil ETF (EWZ) Short Put

   • Thesis: Brazilian elections and geopolitical tensions (BBC) increase volatility, making EWZ's high IV rank of 97 suitable for short puts.
   • Structure: Short 40 put, expiry 30 days out.
   • Max Risk: $4,000 per contract if assigned.
   • Profit Target: 50% of premium received.

Risk Watch

Monitor VIX levels closely; a breakout above 20.31 could signal increased volatility and invalidate the current bias. Stay updated on geopolitical developments, especially in the Middle East and Europe, as they could shift market sentiment rapidly.

Bottom Line

Geopolitical tensions and earnings volatility are key themes this week. With high IV in several names, premium-selling strategies are favored. Stay vigilant for any unexpected geopolitical or economic developments.

Educational content only — not financial advice. Trade your own plan.