I found this stock using a custom scan I built searching for names where IV30™ is up at least 10% today. The scan details are below with a snapshot if you want to build it yourself in Livevol Pro.
Custom Scan Details
Stock Price >= 10
Average Option Volume >= 1,200
Days After Earnings >= 5 and <= 60
IV30™ Percent Change >= 10%
IV30™ >= 10
The goal here is to find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.
The HPQ Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).
IV30™: 27.31
HV20™: 24.69
IV180™: 27.84
We can see the IV30™ rose into earnings (as expected) then fell. Today it's pointing back up and is almost as high as the HV180™ (long-term realized) and is a few points passed the HV20™ (short-term realized).
The Skew Tab snap (below) illustrates the vols by strike by month.
The skew looks pretty normal, though the upside does bend up a bit. Finally, let's look to the Options Tab.
Possible Trades to Analyze
1. Sell the Dec 42 straddle if you want sell naked vol. It looks like the straddle can be sold @ ~$2.11. I'm not in love with this trade. I'd rather sell 30+ vol in HPQ.
2. Do trade #1, but purchase the 41/43 strangle for $1.28. This is a fancy little bet that risks $0.17 to make $0.83, but has a small probability of success. I've included the PnL chart for this trade below.
Assuming a log-normal distribution of stock returns, back of the envelope calcs yields ~ 10% probability that the stock is in the range ($42.17,$42.83), which is the range necessary on Dec expo for the trade to be a winner. In other words, if the stock moves at the current vol, this doesn't look real good.
3. The markets are nice and tight on this stock, selling the downside seems reasonable since those vols are in the 31+ range.
This is trade analysis, not a recommendation.
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