This segment is about liquidity metrics and focuses on Chipotle Mexican Grill (CMG) as an example to show what is important in determining liquidity and what to trade.
CMG is first compared to AAPL regarding trading ranges. A table of the percentage that CMG and AAPL have stayed inside a 1 Standard Deviation move and the percentage that they both stayed inside a 2 Standard Deviation move was displayed.
CMG can’t be compared well to AAPL regarding the bid/ask since their prices are so different. A second table compared the CMG and AMZN (a similarly high priced stock) at-the-money bid/ask spread currently and the bid/ask spread on September 28th when the VIX was 15% higher. Some of the problems with a lack of liquidity were also discussed.
Finally, a real world example of the bid/ask ona spread was examined. An example comparing both the natural and mid-price of a 1 standard deviation $5 wide Iron Condor of both AAPL and CMG was displayed. The difference between the two underlyings was staggering.
The Dough liquidity meter that is displayed on the daily Data Science & Research Report which is sent out to all BOB subscribers was shown. This feature is also available on the Dough platform. Tom mentioned that the liquidity meter will soon be part of the live show. CMG received a 1 star out of a possible 4 star liquidity rating.
Watch this segment of “Market Measures” with Tom Sosnoff and Tony Battista for the takeaways and other important information about liquidity metrics and find out why stocks that appear to be good trading vehicles with high IV Rank might not be worth trading.
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