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Implied Volatility Deep Dive | Real Interest Rate Yields | The Big Short | Tesla vs Nvidia Volatilities

By Derek Moore

Show Summary:

Derek Moore is back with ZEGA CEO Jay Pestrichelli where they discuss whether higher real yields are an issue for markets and how this period seems similar to the 1990’s. Then they dive into implied volatility using companies like Tesla TSLA and Nvidia NVDA as examples to explore how options markets express views on expected moves based on options prices. What are the drivers of volatility moving higher or lower. How earnings affect implied volatility and what typically happens after the announcement. They also have a side bar discussion comparing the debt of Tesla to Ford for no reason than that it’s quite different. Finally, some recommendations. 

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Topics Include:

  • Unemployment What is implied volatility?
  • How to calculate implied price moves using implied volatility
  • Comparing the implied volatilities of NVDA Nvidia vs TSLA Tesla as examples
  • How implied volatility often rises and falls with earnings. 
  • How option prices bake in expectations
  • The rule of 16 and implied volatility
  • Stories about implied volatility rising around major events.
  • Debt of Tesla vs Ford
  • What is enterprise value?
  • What are real yields?
  • Real yields vs nominal yields
  • Are higher real yields a problem for markets?
  • 10-year real yield rising
  • Comparing real yields today vs the 1990’s bull market in equities
  • Why investors should want positive real yields.
  • GameStop armchair analysts in the end weren’t right about the company.
  • Upcoming GameStop movies and whether sensationalizing this hurts investors.
  • Did the Big Short Movie cause investors to always be trying to bet on the next big thing?

Mentioned in this Episode:

GameStop Short Squeeze by the Reddit Wall Street Bets Traders Explained

The Big Short Movie and Credit Default Swaps Explained

Margin Call Movie and Understanding Value at Risk 

Recession Predictions Still Wrong? | Synthetic Options | Unemployment Anomalies | Oil Prices Breakout

0 DTE Options No Problem? | Jay Powell’s Wyoming Speech Points to More Interest Rate Hikes?

Jay Pestrichelli’s book Buy and Hedge 

Derek’s new book on public speaking Effortless Public Speaking 

Derek Moore’s book Broken Pie Chart