This ARKK almost sank

Andrew Giovinazzi

BY ANDREW GIOVINAZZI

December 3, 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 Trader,

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In the meantime check out what this fund manager, the famed Cathie Wood or Ark Investments, has done for the year. Like a lot of stocks, Ark Funds Tech and Innovation (Ticker: ARKK) is near highs of the year. After a trip into the low 30s from the $150s in 2021, ARKK has had enough excitement for any fund manager.

I will let Mark and Griff go into the specifics of what ARKK owns, but the options IV are getting pretty low but have recently perked up.

1 year chart of ARKK with 90 day realized vol in purple and IV60 in yellow

The question though, is there any edge in the option pricing for the average investor.

Let’s go see.

Short term picture is quite different today in ARKK

AARK options are trading in what I call a “breakout” formation. Low IV with a relatively higher IV makes me want to backspread the options. “Backspread” just means an option position that wants the underlying to move a lot, anywhere up or down. That is just some variation of a long strangle, long call and long put, or a call ratio back spread.

ARKK 30 Day IV in red with 20 day Realized Vol in Blue

With the ETF moving parabolically higher, I don’t want to short this with the options so cheap. Just lean long and backspread the options. ARKK likely runs to a year high so the Jan ordinary options would work best.

Check us out on Monday morning at 1030 et!