Stocks hit an all time highs but quite a few make all time lows

BY ANDREW GIOVINAZZI

September 18, 2024

Yo Pit Crazies,

In the world of what goes down but can go up, like VIX, stocks can do that too. Tired of waiting for the Fed to do something? Try this on Thursday and put a little flash in your investing.

Here is a tail of two securities, the S&P 500 Trust ETF (Ticker: SPY) and Walgreens Boots Alliance Inc (Ticker: WBA). One traded all time high today and one trades at an all time low,

SPY 1 year chart with implied volatility on the bottom chart

Clearly SPY is straight up but notice implied volatility is not where it was the last time SPY made an all time high. I would view this more as a trading opportunity.

WBA 1 year chart with IVs on the bottom

WBA is taking a very different track with IVs at 1 year highs after the stock price turned in a 52 low.

The market is telling us something here.

Implied Volatility (IV) tells a story

Both the SPY and WBA are showing much higher IV than normal. The SPY because the Fed is going to issue the rate proclamation like some Medieval lord on Wednesday and we could be 10 points up or down easy. WBA IV is higher because traders are looking for a larger bounce and buying upside calls. They might be early. Once a stock is $8 and the company is still a going concern there is not a ton of downside to make money.

Note the upside skew in the options for WBA below. The more expensive volatility means traders are starting to speculate on a bounce.

Another possibility is a dividend cut for WBA which would be the second of the year as they struggle with write offs due to poor investments. Even if they cut it in half it would still be a 5% yield. That is not the over 10% now but 5% is not bad. WBA might make a good investment at one point but it is still a distressed stock and div cut would drop it another 20% or so.

When to hop on the train?

Join me on Thursday to find out.