Yo Pit Crazies,

The Invesco QQQ Trust (Ticker: QQQ) recovered yesterday to reclaim some gains.

For the most part the ticker was $289 in March – now it’s $355.

The safety of big tech is still blaring like a klaxon even though earnings growth slowed for last year.

3 month QQQ chart with 30, 60, 90, 120 day IVs on the 

But what I like to see with rallies is the long implied volatility chart rolling down to the bottom right corner.

Big things are afoot.

What Makes IV Drop?

It’s the rip!

Or to put it better, the chance stock can rip higher keeps IV higher. Most rips higher are in bear markets where the liquidity is poor and most traders do not want to sell anyway.  

A rip is the upward movement of the underlying far outpacing the IV of the at the money options.

If the Fed is taking the summer off and AI is still a figment of the future, rips will be left to individual names and not the broader market.  

2 year 30 day realized volatility for the QQQ

Note the 30 day realized volatility for QQQ over the last 2 years. The crazy bullish time in 2021 pushed realized vol to the single digits. The big indexes were not ripping then, just steadily making new highs.

And here we are again. Look for lower broader market volatility very soon. 

The Trading Desk will help with that.

To Your Trading Success,

AG