CurryOption

[Options Talk] Educational Article: Analysis of the Correlation Between Stock Price Returns and Implied Volatility ($TSLA)

$IBM's stock price has risen 38% in the last 11 trading days, mainly due to significant positive news in the quantum computing field, coupled with funding support from the Trump administration, which has triggered strong buying in the market.
We can trace back from options data to see that some funds had already entered the market before the news was released.

IBM announced that it will invest over $10 billion in the next five years to develop quantum computing, with the goal of building a large-scale, fault-tolerant quantum system by 2029. This includes R&D, manufacturing, acquisitions, and collaborations.
At the same time, the U.S. Department of Commerce allocated $2 billion through the CHIPS and Science Act to nine quantum companies, with IBM receiving the largest single grant of $1 billion to establish the first "pure-play quantum wafer fab" in the U.S. in Albany, New York.

$IBM's stock price has risen sharply recently. From the top-left chart, we can see implied volatility rising sharply, with the stock price (white dotted line) climbing almost vertically, and implied volatility catching up quickly, though slightly lagging.
Meanwhile, the top-right chart shows the volatility spread trend over the past two years. The current volatility spread is deeply negative, indicating that market trading is clearly dominated by momentum-driven bullish buying. Looking back at the data from the past two years, the last time it was this negative was in mid-2024, after which a six-month uptrend followed.

Now the volatility spread is extremely negative, and the current pattern, in terms of both depth and breadth, is unprecedented.

$IBM is experiencing a rare bullish atmosphere in recent years.

The bottom-left chart shows the change in options positions during a single trading day on Friday. The enthusiasm for opening bullish options positions was overwhelmingly stronger than for bearish options.
The bottom-right chart shows the daily change in $IBM's bullish options positions since early April. In this heatmap, we can see an abnormally active bullish options opening signal as early as 05/08, with the strike price heavily concentrated at $260. 05/08 was not the recent bottom of the stock price; the lowest point in the past year occurred on 05/13.
The background of the initial position building on 05/08 was that the stock price was still in a significant downtrend. The continuous large-scale entry of $260 strike price positions was already unusual. After the $260 positions were built, a few days later (05/13), the stock price began to rise from the bottom. The $260 strike price bullish options gradually exited by taking profits, until 05/22 when large-scale bullish options positions emerged due to news catalysts, and the $260 options still chose to close their positions at that time.

Below are two key time nodes:
May 21st → CHIPS Act + Anderon quantum wafer fab news officially released (first wave of positive news)
May 28th → IBM's $10 billion quantum investment + Project Lightwell news officially released (second wave, stronger catalyst)

On 05/22, a large number of bullish options positions appeared, continuing until 05/29 when the scale of position building intensified further, completely driven by news-led bullish buying. During this sharp rise, options positions with strike prices set at $260 were usually one step ahead and conservatively liquidated in batches during the uptrend to lock in profits early.

Frankly speaking, the above two policy-level positive developments are certainly very beneficial for $IBM. However, for these things to translate into actual revenue is a distant future.
Will the stock price rise further?
Of course, it's possible. After all, the potential for more support from the Trump administration cannot be ignored. But this is a completely different logic from the stock price rise of $MU, $TSM, $NVDA, which is based on actual revenue backing.

$MSFT  In 2026, Microsoft continued its decline from 2025. With the rise of the Claude model launched by Anthropic this year, Microsoft's stock price fell more sharply this year, dropping from the beginning of the year to early April, hitting a two-year low of around 355.The top-left chart shows the long-term volatility trend. It can be observed that at the end of last year, the decline in stock price also drove down volatility, with a slow decline accompanied by a decrease in trading activity.However, after the earnings report at the beginning of the year, a new baseline was established. Subsequently, even as the stock price fell to early April, volatility did not decrease.Although the decline in $MSFT started last November, for the same downward wave, market participants had two different trading sentiments.Entering 2026, the continuous decline has instead kept implied volatility at a higher baseline (~25%). I believe that if the stock price falls below $425, it might trigger some holders to consider buying insurance for a deeper decline (buy put), while others might think it's time to enter the market and buy call options because Microsoft is already oversold.Both sentiments lead to a continued decline in the stock price but push implied volatility higher.Until early April, the capital judging that $MSFT was oversold gradually became mainstream. Therefore, you can see in the top-right chart that the short-term Put/Call volatility spread followed a gentle downward trend, even briefly falling below the zero line recently.The rebound in $MSFT in early April lacked sustained momentum. After the earnings report, the stock price stagnated and fluctuated at this level, while the overall implied volatility fell back to the pre-earnings baseline.Interestingly, although overall volatility decreased, the buying pressure for call options still outweighed that for put options. Therefore, the Put/Call volatility spread did not return to the past pattern dominated by put options.The bottom-left chart shows the daily change in $MSFT option positions during last Friday's trading session. At this time, under conditions of low volatility, we can observe that call options were actively opened across all options, with a wave of capital very confidently bullish. In contrast, the opening of put options can only be described as sporadic.The bottom-right chart shows the daily change in $MSFT call option positions since March. Since May 18th, this unusual bullish buying sentiment has been continuously building call positions daily, with strike prices ranging from $420 to $440, until May 22nd when even more aggressive position opening occurred. Furthermore, judging from the volatility spread trend in the top-right chart, these long positions were dominated by buying, not by long-term holders selling covered calls.

[Implied Volatility Rank, Cross-Security Comparison]
$MRVL remains at the top, still at rank=100.
$CRM has shown strong stock price performance recently, with its I.V. rank rising to 88.
$AMD / $MU remain high at 77.
$INTC is relatively high at 75.

Stocks with particularly low Volatility Rank:
$IBIT is down to only 8, completely ignored. $NOK's stock price has surged strongly, but its rank is only 12. $CIFR, $AMZN, and $HYG. 

$IBIT  Because the implied volatility of IBIT (BTC ETF) is so low that it piqued my curiosity, I couldn't help but take a closer look at its trading data.
I'm quite old-fashioned; I hold cryptocurrencies but don't trade them, treating them simply as part of my asset allocation. Moreover, I still firmly believe in Bitcoin's four-year bull-bear cycle.
This year should, in theory, be a bear market year. Typically, the third and fourth quarters of a bear market year are the time to look for buying opportunities.
This time is no exception for me, so for the entire first half of 2026, I've paid almost no attention to cryptocurrencies. My only remaining connection to them is the few hundred shares of $MSTR and $COIN in my account.
Depending on the situation in the second half of this year, I might buy some cryptocurrencies and then wait two years before paying attention again.

However, the recent I.V. rank of $IBIT is just too low. Let's see what's going on with its data?

First, look at the top-left chart. This shows the overall implied volatility trend over a two-year period. You can see that since February 10th of this year, when Bitcoin had its second major plunge, the implied volatility spiked, forming a new starting point for a volatility wave.
From February 10th to today, May 22nd, the implied volatility of $IBIT has continued to decline. Even though the real-time stock price (BTC price) later showed a pattern of gradual increase, $IBIT's volatility has kept falling relentlessly.

The last time it was at such a low level was around the end of August last year.
The troubling part is that at that time, when the implied volatility was this low, it coincided with a peak in Bitcoin's price.

If you look at this two-year chart, you'll find that relative lows in implied volatility often correspond to price tops. Conversely, highs in implied volatility often correspond to local price bottoms.

Now, with $IBIT's volatility at a very low level, don't you think that's scary?

The top-right chart shows the two-year Put/Call volatility spread. We can see that the local highs in volatility observed in the top-right chart usually correspond to local highs in put option volatility. The two align perfectly.

So, if any friends want to build a Bitcoin position in the second half of the year like I do, how should they look at it?

At the very least, we need to wait until put option volatility significantly surpasses call option volatility.
But for such a scenario to occur, unsurprisingly, it would require a panic-inducing drop. Can we overextrapolate from this and assume there will be another drop in the second half of the year?
That would be a bit of a stretch. This data isn't predictive; it merely describes the current state! Whether there will be a panic-driven drop in the second half of the year, neither the data nor I can predict. But if such a state does appear, it would be a great entry opportunity with a favorable risk-reward ratio.

The bottom-left chart shows recent volatility trends. This chart displays four different option expiration dates, from near to far, showing a highly consistent volatility trend. Volatility is declining consistently from near-term to long-term, even as the stock price shows a pattern of gradual increase. Stock price and volatility show a negative correlation!

Finally, let's look at the bottom-right chart. This is the options position change chart from yesterday's trading. Although call option opening was relatively active, these new positions were not formed by very aggressive chasing buying, as the Put/Call volatility spread is currently even above the zero line.

After Amazon's earnings report, $AMZN's stock price retreated, and its implied volatility also dropped to a new low for the year. From the two-year volatility trend chart in the top-left graph, it can be seen that during the stock price's pullback from the high, the implied volatility gradually rose from the bottom, showing a relatively healthy negative correlation.
The top-right graph shows the two-year trend of the Put/Call volatility difference. The current difference is above the zero line, which is also the baseline value for the past two years.
In this volatility difference chart, three dates are worth noting: 2024/08/15, 2025/04/04, and 2026/03/05.
Around these three dates, you can see the brick-red lines all show a raised head pattern, which corresponds to the local lows of the stock price. $AMZN has this commonality: when the put volatility is significantly higher than the call volatility and persists for a period, it often indicates a local low in the stock price.
The bottom-right graph shows options expiring within the next month. The maximum pain point price has caught up with the stock price, making the recent $AMZN pullback worthwhile. The maximum pain point price catching up with the stock price helps initiate a new round of upward movement.
In the position accumulation chart, I found that for options expiring on 06/05, there is an in-the-money put option with a size of about 7,000 contracts, with a strike price likely at $285.
I checked that the previous high of the stock price was only $278.5. In other words, these 7,000 contracts were in-the-money puts when initially established. The liquidity of in-the-money options is slightly worse, and with a size of 7,000 contracts, this operation is very unusual and extremely rare.
Of course, buying in-the-money puts can be interpreted superficially as a short position with lower leverage. Since the initial strike price is set in-the-money, the probability of the position expiring worthless due to unfavorable price movement is less than 50%. It's a slightly more conservative shorting operation.
The above view assumes that these 7,000 contracts were primarily formed by buyers.
Let's look at the bottom-right graph again. This heat map shows the daily position changes for put options recently.
If we focus on the $285 strike price (the far-left edge of the chart) and track from late March to today, there were only two days with significant put option accumulation: 05/08 and 05/19, with the accumulation on 05/19 being particularly intense (thousands of contracts).
05/19 happened to be the worst trading day forming the recent stock price low ($255). I speculate that during trading on that day, traders or trading algorithms saw signs of further accelerated decline in the stock price, so they positioned in-the-money puts for a lower-leverage short.

The above are all my speculations based on stock price and options trading data. Whether buying or selling, having such liquidity (without disturbing implied volatility) actually indicates that the forces on both sides are not significantly different.

$NOK I no longer highlight $NOK's low implied volatility rank now, because that would cause misunderstanding. In fact, if you only started looking at its implied volatility in March this year, you would judge the current volatility to be very high. It only reached the peak volatility (110%) on 05/26. However, if you include the volatility jitter caused by liquidity factors earlier, you would misjudge the current volatility as seemingly very low.

The top-right chart shows the maximum pain point price trend for the most recent one-month options. Although $NOK's stock price has been rising continuously, the price drop in the last two days has allowed the maximum pain point to catch up. 06/18 belongs to the monthly options, which have already accumulated over 200,000 contracts in open interest, making it relatively more difficult to move, but it can still be seen to have been continuously rising over this month. These are patterns relatively favorable for subsequent stock price increases.

The bottom-left chart is the single-day open interest change chart for $NOK after two consecutive days of price decline. It can be seen that the opening of call options is still relatively active. Surprisingly, options expiring in 85 days even saw new call open interest of 16,000 contracts at a strike price of $18. Since the Put/Call volatility spread has fallen below the zero line, the positions should be primarily established by buying pressure. The bottom-right chart is the open interest change chart for call options from early April to the present. This heatmap shows that the most actively traded call options are distributed at strike prices of $16~$17. It wasn't until yesterday that a large amount of open interest appeared at the $18 strike. The stock price only experienced a slight adjustment, which does not affect the confidence of market participants. Call option buying on the rise is still active, and the distribution of strike prices has actually moved upwards.

$SATS This is the first time I've looked at $SATS data. It was mentioned twice on my feed before, but because trading data for this type of newly popular stock is usually harder to analyze, I put it off until today.Although $SATS is a hot stock in the spotlight, looking at the two-year implied volatility trend in the top-left chart, we can see that since around February this year, after approaching a new, higher baseline, it has generally oscillated around this baseline (~60%). Even the sharp stock price rise since late April hasn't helped lift implied volatility.Options trading isn't very active. Looking at the top-right chart, which shows the two-year Put/Call volatility spread, we can see recent spreads are similar to the lows of last December or October, indicating that confidence in the bullish side is still being injected during the stock price rise. Implied volatility hasn't increased significantly, but call option trading is still relatively popular.Surprisingly, the bottom-left chart shows a very large number of put option positions opened, and they are opened at very out-of-the-money levels (possibly at the $95 or $100 integer levels). There are also around two thousand put option positions opened near at-the-money levels, with a more ordinary volume.The momentum of chasing the rally may have seen a turning point in last Friday's trading, as last Friday's position changes showed a rather lukewarm willingness to place bullish bets.The bottom-right chart plots out-of-the-money call/put options separately over the past year. Even though the stock price has risen significantly recently, breaking through the upper resistance level, the option volatility hasn't changed much. Both the green dotted line (Call) and the red dotted line (Put) seem to have only minor ripples.Why is options trading so calm? We'll have to wait three or four days to see how the data changes before it becomes clear.

$GOOG has been really busy lately. I originally had no plan to post before the market opened today, but I suddenly remembered that the Google I/O conference is happening this week. I suddenly felt it necessary to take a look at $GOOG's data before the market opens on Monday.
When I look at the top-left chart, the two-year implied volatility, I think the current volatility is underestimated.
This Google I/O conference should be considered an event on par with an earnings report. Besides some hardware product announcements, Google is highly likely to introduce the next generation of Gemini and might even add some AI products at the Google I/O conference.
Now, among the three AI giants, no one permanently holds a dominant, overwhelming lead. Every time a new model is released, regardless of its benchmark ranking, there are always some features that can capture media attention and investor focus.
The top-left chart shows that $GOOG's implied volatility is still clearly at the pre-earnings baseline level, which I believe is an underestimate. In this state, if you are on the options selling side, you will bear event risk.

The top-right chart doesn't have new information. Because since the earnings report, the long positions in the tech sector haven't shown significant signs of retreating, so the Put/Call volatility spread remains near the zero line.

The interesting one is the bottom-left chart. In last Friday's trading, there were a large number of call option bets for mid-July, all bought out-of-the-money with a total volume exceeding ten thousand contracts. This is an abnormally bullish bet, but because the duration is as long as two months, it doesn't necessarily seem to be a bet specifically on the Google I/O conference.

The bottom-right chart is the cumulative position distribution for end-of-May options. At the maximum pain point price of 370, there happens to be a massive put option. Since this put option is still out-of-the-money, the maximum pain point price is unrelated to it. However, if the stock price falls, the strike price of 370 will definitely be a strong support level in the downward direction.

[Implied Volatility Rank, Cross-Asset Comparison]
$MRVL  slightly decreased from 100 to 97.
$MU  dropped significantly to 75. $NVDA  slightly decreased to 80.
$INTC  cooled down rapidly to 61, almost back to the yellow light.

Particularly low ones are: $MAZN, $IBIT, $BTBT, $CIFR, $NFLX, $PLTR and $HYG. 