Implied volatility came screaming off as the stock market rallied on Tuesday. The catalyst was a warm and fuzzy feeling flowing from China after the central bank slashed interest rates in an effort to help stem the tide of selling.
It was the fifth cut in monetary policy in nine months and accompanied by further tinkering with the reserve requirement ratio. The mood in global risk appetite changed swiftly and has caused the CBOE Vix index to tumble by around 21% to 32.19. The following table ranks declines in implied volatility among companies larger than $1billion in market cap, whose option volume is greater than 500 contracts in early trading. IV readings for Best Buy Co. Inc. (Ticker: BBY) and JPMorgan Chase & Co. (Ticker: JPM) are down by almost 30% on the respite from sellers.
Table shows option volatility slumps across the board