A Veritable GOOG Volatility Explosion

• Posted by Adam Warner
• on March 14th, 2010

Ladies and Gentlemen, we have a good looking volatility chart!

Yes, GOOG. check out the yellow line in the top graph, 30 day normalized volatility has gone from 22ish to 28 in a little over a week.  Part is a mini-quirk as GOOG confirmed earnings will come out right before April expiration, and April is essentially the 30 day vol. now. Part though is real as volatility lifted across the board.

This is not a common occurence in 2010. As we go over ad nauseum, virtually every option is simultaneously for sale, and yet overpriced vs. realized volatility.

GOOG stock made a move recently outside the incredibly tight range that trapped it for a month. But as you can see on the second chart, 10 Day realized volatility merely lifted from utterly pathetic to simply low. From near 11 up to about 18, before drifting again. That’s just normal variation in a noisy number. And even at the top of the pop, did not hit the 22 volatility that GOOG options already priced in.

There’s news around in GOOG, but there’s really always news around in GOOG. Their either developing a new Apple killer something, getting sued for privacy violations, or negotiating with China. The options seem to to predict, or at least fear, something on the horizon.

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