tastytraders who like to review their portfolios when the weekend hits, as well as relevant market news and analysis may want to add This Week in Stocks to their Saturday/Sunday watchlists.

This is a relatively new series on the tastytrade network that airs every Friday, and provides a review of some of the most important trading themes observed during the week. For example, the episode from Friday December 7th featured the theme "fear in the financial sector," and highlighted some very interesting data that was observed in the first week of December.

While the theme of the show obviously changes based on what's happening in the market, the hosts of This Week in Stocks (Frank Kaberna and Nick Battista) always review a set of key data points - including the biggest movers in the market, the places where implied volatility increased/decreased by the greatest amount, and/or some highlights from the IVR leaderboard (highest and/or lowest).

Anyone watching This Week in Stocks from December 7th would quickly see that one of the biggest themes that week was an increase in implied volatility across the financial sector. As you can see in the two graphics below, names from the financial sector were splashed across the most important implied volatility rankings.

In the first slide, you can see that several financial names were among those symbols with the biggest increases in implied volatility from the week. In the second slide, we see the financial names once again featured, appearing in the list of stocks with the highest IVR rankings:

This Week In Stocks
This Week In Stocks

Digging a little deeper into the data, we can see that Citigroup (C) was one of the biggest losers (in terms of underlying price) during that 5-day span.

In this context, it's slightly less surprising to see that implied volatility also made such a big jump in C, and that Implied Volatility Rank (IV Rank) is now trading at about 98% - which means that implied volatility in C is trading at nearly the highest levels observed in the last 52 weeks.

All together that means that C stock is at 52-week low, while C implied volatility is right around 52-week highs - a familiar correlation.

It's important to add that this doesn't appear to be a Citigroup-specific trend, as the ETF for the financial sector (XLF) is also trading near 52-week lows, which is why other financial names show up in the biggest loser and highest IVR group (BAC, MS, GS). It should also be noted that the S&P 500 itself lost over 4% during the week in question - meaning the broader market was weak, too.

The pick-up in volatility across the financial sector is especially notable because this structure serves as the backbone to the American economic system. While there’s certainly no talk currently that the United States is any danger of a broader financial calamity (as observed in 2008-2009), one should always follow implied volatility trends in the banking sector much like a canary in a coal mine.

I can recall in my own career that as implied volatility started to increase in the financial sector throughout 2007 (in the lead-up to 2008-2009), we started to feel extraordinary pressure on our short premium exposure.

As of now, the pressure on financial stocks will likely be attributed to expected weakness in the economy due to the threat of a potential recession, and the trade war. However, longer-term (potential) considerations must also be kept in mind.

As for This Week in Stocks, Frank and Nick spend a good chunk of the show discussing how this “fear in the financial sector” will guide their approach going forward, and even discuss a range of sample trade structures. These positions are for illustrative purposes, as each and every trader should only deploy risk that fits their outlook and risk profile.

We hope you’ll take the time to review the complete episode of This Week in Stocks focusing on fear in the financial sector when your schedule allows. Or, feel free to tune into the newest installment every Friday.

If you have any questions for Frank and Nick, don’t hesitate to leave a message in the space below, or contact them directly at @tastytrade on Twitter or by email at support@tastytrade.com.

They look forward to hearing from you!


Sage Anderson has an extensive background trading equity derivatives and managing volatility-based portfolios. He has traded hundreds of thousands of contracts across the spectrum of industries in the single-stock universe.


Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.