BY ANDREW GIOVINAZZI 

August 27, 2023 

Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.

Have a stock YOU want us to review? Email my team here. – Mark

Hey Traders,

Here’s my weekly take on volatility in a name from our subscribers. The name this week is Generac Holdings Inc (Ticker: GNRC).

Full disclosure: I HAVE A GENERAC GENERATOR AND I RUN MY HOUSE ON IT WHEN THE POWER GOES OUT. It works great, and once I discovered removing the fuel after use, my carb never gums up so it always fires up – even without using that crazy priced non-ethanol jet fuel.

At one point GNRC was a $500 stock in 2021. Probably riding the green revolution or something but it has not gotten anywhere near that lately. Recently, the stock dropped $40 on a bad earnings call as revenues slipped and higher prices did not make up for it.  

I’m here to look at the volatility.  

1 year GNRC chart with 60 day implied vol

There are some interesting things afoot …

GNRC 60-Day IV is at Multi-Year Lows

Beside the dumb data gap, which I told Livevol about, IV in GNRC is very low. I don’t think the stock snaps back anytime soon but stocks at 75% off from peaks that are still going concerns that make money have my interest.

GNRC 2 Year chart with IV 60

While the IV is absolutely low, the options premiums are still expensive. I can see diagonal puts spreads, selling near term near the money and buying longer term out of the money, as a way of collecting premium and making enough to buy a call. I will go over the idea in OP Mentoring this week.

Buying the longer term option and low implied vol and selling short term options is a good, margin friendly way to sell puts in a name that is moving sideways to up. The lower IV makes the longer term options cheap.

To Your Trading Success,

AG