Monday, September 20, 2010

SunPower (SPWRA) - Low Vol and Uneven Skew May be Purchase

SPWRA is trading $12.39, up 3.0% with IV30™ up 3.0% as well. The LIVEVOL™ Pro Summary is below.



SPWRA is a vertically integrated solar products and services company that designs, manufactures and markets high-performance solar electric power technologies.

I found this stock from my low vol real-time custom scan. You can read about the details of the scan here: Custom Scan: Finding Low Vol to Purchase

The company has traded over 11,000 options on total daily average option volume of just 4,259. All but 251 contracts have been calls yielding a 46:1 call:put ratio. The action has been in the Oct 14 and 15 calls; mostly long interest I believe. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).





Let's look to the Charts Tab before looking at prices. The 6 month vol chart (IV30™ - red vs HV20™ - blue vs HV180™ - pink) is included (click to enlarge). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.



We can see the IV30™ is 51 while HV20™ and HV180™ are 62. In other words, the short term and long term realized volatility in the stock has been more than 10 points higher than the current implied. This stock was recently upgraded by two sell side firms giving it a nice little pop at the end of August and shooting the HV20™ up (see blue line pop).

The Skew Tab snap (click to enlarge) illustrates the vols by strike by month.



What's cool here is that not only is the IV30™ low relative to short and long term realized, but the $13 strike is oddly low, pricing a little less than 47 vol. The 14, 15 strikes are then higher because of the order flow.

Finally, let's look to the Options Tab (click to enlarge).



First, we can see that the calls today are opening (volume >> OI). Next we can see some prices.

Possible Trades to Analyze
To really jump on a "guess" of low vol, a 13 strike straddle can be purchased for ~$1.37. That would require SPWRA to be outside of the range ($11.63, $14.37) if held to Oct expo in order to be profitable. Selling the Oct 11,14 strangle @ $0.35 brings the net debit down to $1.02. A 12/14 strangle sale brings the debit down to $0.77.

A more bullish approach could be to buy the Oct 13 calls and sell the Oct 12 puts @ a net credit of ~$0.11. A touch less risky is selling the Oct 11 puts instead, creating a net debit of just ~$0.18.

This is trade analysis, not a recommendation.

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

2 comments:

  1. Ophir,

    Have you been personally trading any of these ideas lately?

    ReplyDelete