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The stock just came up on two real-time custom scans. The calendar spread and high vol scans. With earnings confirmed in the Nov cycle (Monday of the new cycle), this is an interesting trade.
You can read about the two custom scans here:
Time Spread Custom Scan
Elevated Vol Custom Scan
The goal with the calendar spread scan is to identify back months that are cheaper than the front by at least 8 vol points. The goal of the high vol scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20™) and the long term trend in stock movement (HV180™). Details and caveats in the links above.
Let's look to the Skew Tab (below) and examine both the shape and the absolute vol differences.
So we can see both elevated Oct vol (red) to Nov (yellow) and a substantial upside skew bend in Oct. Hmm...
Now we can turn to the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.
So we're looking at this:
IV30™: 75.30
HV20™: 58.75
HV180™: 62
So the short term vol, and in particular the Oct vol (91.62) is quite elevated. We can also see that the stock has gone from ~$10.80 up to $17.12 in just two months.
Finally, let's look to the Options Tab (below).
Potential Trades to Analyze
1. Sell that Oct vol. A 17/18 or 16/19 strangle sale looks pretty juicy, though risky and naked two sides.
2. Do a 1x2 twice. The upside skew bend gives the opportunity to buy ATM for lower vol that the OTM on both the upside and the upside. An Oct 19/20 1x2 call spread should yield ~ $0.12 credit. An Oct 16/17 1x2 put spread should yield ~$0.05 credit. Beware naked up and downside though in a stock with popping vol.
3. Time spread. Sell Oct ATM (or strangles) @ ~92 vol and buy the Nov options for ~ 73 vol and get earnings.
4. #3 with a twist. Sell the Oct 16/19 strangle @ ~$0.80 and buy the Nov 18 calls for $1.35. That's a net debit of $0.55. This trade wins to a stock pop or a takeover. It also wins to stock sitting and wins to theta. It loses to a downside move as it's naked short puts. A slight adjustment to this could be to buy the Oct 15 puts for $0.25 (ish) to help with margin or simply doing the call side and leaving the puts alone.
5. Time spreading the skew. So, Sell Oct 19 calls @ $0.36 and buy Nov 19 calls for $1.03. That's selling 99 vol and purchasing 73. This loses to takeover, but max loss is limited. Of all the trades, I think this is the most interesting. An alternative is doing Oct 19 with Nov 18 to have some deltas.
Make sure to check why this vol is elevated, as I can't find a clear reason.
This is trade analysis, not a recommendation.
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