Northern Oil (NOG) - Calendar Spread to OTM Call Diff

NOG is trading $21.67, down 7.4% with IV30™ up 13.5%. The LIVEVOL® Pro Summary is below.



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Northern Oil & Gas, Inc., is an independent energy company engaged in the acquisition, exploration, exploitation and development of oil and natural gas properties.

The stock just came up on the calendar spread real-time custom scan between the front two months.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.




The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated front month vol simply because earnings are approaching.

Let's start with the Skew Tab, below.



The front month lies on top of the second month, but in particular the 23 strike (OTM calls) shows an unusually large diff. Priced to trade (closer to bid in Jul and closer to offer in Aug) it's still a 15 point vol gap (70 to 55). Keep in mind, this stock closed last week at $23.41.

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).





We can see the stock drop today, and the vol pop. Check out how high IV30™ is relative to the short-term historical vol (HV20) and the long-term historical vol (HV180). Specifically:

IV30™: 56.91
HV20: 45.00
HV180: 51.79

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



Potential Trades to Analyze
1. Calendar spread on 23 line
This purchases ~15 vol points less than it sells and owns earnings in Aug in a stock that was over $23 one trading day ago.

2. Diagonal calendar
The Jul/Aug 23/22 call spread purchases ~15 vol points lower than it sells (like above) but owns deltas in the earnings month to play a stock rise after today's market drop.

This is trade analysis, not a recommendation.

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