Is the Vol TOST?

Andrew Giovinazzi

BY ANDREW GIOVINAZZI

November 19, 2023

Ticker of the week: TOST

Each week, I’ll give an overview of a hand picked stock primed to trade and then our team will analyze. 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.

Hey Trader,

If you missed our own Mr Big Frank Gregory describing the benefits of “proximity” do so here.

I like looking at long term charts. I like stocks that are down 80% from their highs.

Now that does not mean I go beating down the door to buy them but stocks are somewhat like fashion and things go in and out of fashion.

Stocks at lows are good to mark and see if they come out of the basement.

A stock like Toast Inc (Ticker: TOST) has been run over in this market because it is not profitable yet.

It does have revenue and it is growing but the market in 2023 is only paying for profits in tech. It is not 1999 or 2021.

90 Day realized vol in purple and 120 day IV in green

I highlighted some long term vols here because I don’t think this is an overnight story. We did highlight and buy some puts in Delta Strike and they made about 30% return or better but many of those put sellers are closing.

Let’s see how to price long term IVs.

Long term IVs are near the bottom of the range

What that normally means is that no one cares. At all. Even with the stock at lows there are relatively few buyers of options and the IVs drop to reflect that. The only real trade here is a diagonal spread or even a 1 x 2 put spread where I buy a put near the money and sell puts OTM.

I don’t think the stock has bottomed but should be close since there is not a whole lot lower it can go. The credits from the diagonals or 1 x 2s could be put to use buying calls down the road when the stock bounces a bit. We will show you how all this works on Monday

Andrew Giovinazzi