A look into MMM’s selloff
September 7, 2022
The low subdued realized volatility regime seems to continue for now with the SPX dropping 0.41% after the long-weekend, the NDX losing 0.72% and the DJIA finishing 0.55% lower.
Looking at implied volatility, it increased by slightly more than 1 point for 30d NDX options as seen below.
![Ivolatility spot price chart](http://www.ivolatility.com/market_news/market_090722_1.png)
Since the August expiration, 30d IVX for the NDX has gained around 9 points, and continues to drift higher.
![Ivolatility spot price chart](http://www.ivolatility.com/market_news/market_090722_2.png)
This has happened despite the fact that HV has remained subdued as seen below.
![Ivolatility spot price chart](http://www.ivolatility.com/market_news/market_090722_3.png)
As a result, the IV premium (30d IV vs 20d HV) has drifted back towards its recent highs of +10 and is now established around +6.4.
![Ivolatility spot price chart](http://www.ivolatility.com/market_news/market_090722_4.png)
Looking at single stocks for Tuesday’s session, things look pretty quiet although within the DJIA components, MMM struggled losing more than 4% over the day as media reported a new lawsuit related to the spinoff of its healthcare business (source: Reuters).
The stock broke its 5 years lows closing at $116.6 against a pandemic low of $117.87.
![Ivolatility spot price chart](http://www.ivolatility.com/market_news/market_090722_5.png)
While implied volatility in the name has increased, it remains far off the highs seen in 2020 as seen below.
![Ivolatility spot price chart](http://www.ivolatility.com/market_news/market_090722_6.png)
Using the RT Spread Scanner, we can search for the best structures to either express a bullish opinion or a bearish one on the name.
For instance, on the bullish front, looking for naked calls returns the following list with a focus on short-dated options offering the best risk/reward. For instance, the 23rd Sep’22 - 126 calls worth $0.5 offer a 9.2% risk to reward ratio. In other words, for every $9c of risk, the trader stands to make $1 of potential profit.
![Ivolatility spot price chart](http://www.ivolatility.com/market_news/market_090722_7.png)
On the downside, we look at naked puts and get the following list:
![Ivolatility spot price chart](http://www.ivolatility.com/market_news/market_090722_8.png)
Here the best opportunities seem to be for slightly longer dated options with 21st Oct’22 - 105 puts at $1.8 offering a 13.05% risk to reward ratio.