Signal du Jour - short vol in MRVL

Now that NVDA is out of the way ...

The big overnight news was the rebuke of the tariff policies by the U.S. Court of Trade, ruling that the legislation the administration used for “Liberation Day” was invalid under the circumstances.

Bummer. Yet the market did not waste a second cheering the decision, pushing the main indices just a few points away from all-time highs. With the 6000 threshold now within sight for the S&P 500—and summer just a few weeks away—it is hard not to imagine a lazy, low-volatility regime taking hold, complete with sleepy risk reversals. But we are not there yet. Let us stay focused for a few more minutes.

The other big headline was, of course, NVDA’s stunning earnings. The stock is up about 5% in pre-market, but that is still well below the implied move heading into the print. So what now? Today, we are skipping NVDA and turning our attention to MRVL—a chip manufacturer with a much gloomier outlook heading into 2025. Let us take a look.

The context

MRVL has had a rough 2025—down more than 40% while the rest of the market has come back to its senses. That is no small feat, especially when you are supposed to be riding the ever-hyped semiconductor/hardware wave powering the genAI craze.

We will not get into the weeds of why it is down so much—frankly, we have no idea. Instead, let us focus on what we do know: the volatility profile. As expected, MRVL saw its volatility spike during the tariff saga, just like the rest of the market, before cooling off over the past month.

But unlike NVDA, which is now drifting toward its lowest realized vol levels in months, MRVL is not there yet. At 60% annualized, it is still running noticeably hotter than anything we saw before April 2025.

Looking at the forecast for realized volatility in MRVL, we expect it to hover near current levels—roughly where it has been throughout May—and drift slightly lower over the next 30 days, settling somewhere in the high 40s to low 50s.

As always, this is just a forecast. It does not incorporate any forward-looking catalysts, but it does help validate the broader cooling regime we are currently observing in MRVL's realized volatility.

Things should keep cooling off, but not substantially either. Be mindful of the news.

Now, while many of the known uncertainties for the next few months appear to be resolved, that does not mean the skies are clear. One unexpected headline could still jolt the market—and MRVL along with it. That needs to be monitored closely.

But that very tension is what may be giving us an edge on the short side of volatility. Market participants, still mindful of downside risks—even if diminished—are likely holding on to some contracts longer than they should.

Let us dig in.