Nexen (NXY) - Huge Vol Diff Opens as Implied Rises 250% Since Deal Announcement

NXY is trading $23.33, down 2.3% with IV30™ up 19.9%. The LIVEVOL® Pro Summary is below.



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Nexen Inc. (Nexen) is an independent global energy company. The Company’s conventional oil and gas assets consist of large acreage positions in select basins, including the United Kingdom North Sea, deep-water Gulf of Mexico and offshore West Africa.

I found this stock using a real-time custom scan I built in Fidelity. This one hunts for calendar spreads between the front two monthly expiries.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 > 7
IV30™ GTE 30
Average Option Volume GTE 1,200

But the real news behind this company occurred on 7-23-2012, when a takeover bid was made and agreed upon. I wrote about that day b/c of some apparent insider trading. You can read that blog here:
Nexen (NXY) - Pre-Takeover Order Flow Looks Like Insider Information; How to Make $32 million (3,200%) in a Week


Today I note the rise in vol and even more interesting, the rather dramatic calendar spread that has opened up. Let's start with the six-month Charts Tab, below. The top portion is the stock price the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



On the stock side we can see the abrupt gap up on the takeover news and then the quiet period following. I do note the recent stock movement which has moved from absolutely still waters to more bumpy.

On the vol side, the story begins to unfold. Check out the rise in the implied of late. At the time of the takeover announcement IV30™ dipped to 25.88%. Today we can see the implied has risen to nearly 90%. So, a huge increase in risk as reflected by the option market.

Let's turn to the Skew Tab and we'll see a very interesting term-structure shape.



Note that for all three front expiries the upside skew slopes down, or said differently, the downside risk rises rather abruptly from the upside risk. This happens in a takeover when the upside is capped (the takeover price) but the downside is left open (if the takeover doesn't go through). What's remarkable here is the rather massive vol diff between the front three months -- and in particular between month 1 and month 3. Something is coming up in Dec -- a finalization, a decision, a vote, a something...

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



Across the top we can see the monthly vols are priced to 93.87%, 72.88% and 52.56%, respectively for Dec, Jan and Mar. While Dec and Jan overall show a ~21 point vol diff, look at the Dec/Jan 20 put spread -- that shows a 27 vol point diff. Similarly, Dec to Mar shows a ~40 vol point diff, but the Dec/Mar 20 put spread shows ~50 vol point diff. Although the spreads look compelling, this could easily be one where owning the vega in Jan or Mar could be a huge loser with the options literally going to zero if the deal is finalized. Ya know... or not...

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Tesla motors (TSLA) - Vol Reaches Multi-year Lows as Stock Pops

TSLA is trading $34.21, up 6.4% with IV30™ down 0.5%. The LIVEVOL® Pro Summary is below.



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Tesla Motors, Inc. (Tesla) designs, develops, manufactures and sells electric vehicles and advanced electric vehicle powertrain components.

This is a vol note -- specifically a company hitting a multi-year low in the implied. I found TSLA using a real-time custom scan. This one hunts for depressed vols.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 20
IV30™ Percentile LTE 10
Average Option Volume GTE 1,200

The goal with this scan is to identify short-term implied vol (IV30™) that is depressed to its own annual history (at most in the 10th percentile). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), and I want a minimum vol level so I don't pick up any boring ETF’s (or whatever). The stock price requirement helps me identify names that have enough strike prices to trade or spread.

The 2-year TSLA 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).



On the stock side we can see that while there have been some ups and downs, the stock has been pretty steady. The 52 wk range is [$22.64, $39.95].

But, this is a vol story -- so let's turn to the two-year IV30™ chart, below.



We can see that awesome decline in the implied of late, pushing well into multi-year lows as the stock has risen from ~$27 to now just under $34. The 52 wk range in IV30™ is [38.27%, 90.05%], making the current level a new annual (and multi-year) low.

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



Across the top we can see the monthly vols are priced to 37.15%, 41.23% and 47.59% for Dec, Jan and Mar, respectively. I dunno, multi-year low in vols right now -- stock up 6% today alone... Hmm...

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Celsion (CLSN) - Odds of bankruptcy, Success and Date for "Make or Break" Cancer Drug Trial Results

CLSN is trading $7.22, down 7.4% with IV30™ up 6.5%. The LIVEVOL® Pro Summary is below.



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Celsion Corporation is an oncology drug development company focused on the development of treatments for those suffering with difficult to treat forms of cancer. As of December 31, 2011, the Company's product ThermoDox is being evaluated in a Phase III clinical trial for primary liver cancer (the HEAT study), a Phase II clinical trial for colorectal liver metastasis (CRLM) and a Phase II clinical trial for recurrent chest wall breast cancer.

This is a bio-tech note -- one with huge vol and some fascinating spreads and option pricing which lead to back of the envelope probability pricing. Let's start with the Charts Tab (one year) below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



On the stock side we can see the massive run up of late pushing the stock above $7 as the implied rises. There is an interesting article on Seeking Alpha from which I have taken a little snippet:

---
We are getting awfully close to January 2013 top-line release of "the Phase III HEAT Study, a multinational, double-blind, placebo-controlled, pivotal study of ThermoDox in combination with radiofrequency ablation (RFA) for the treatment of hepatocellular carcinoma (HCC), also known as primary liver cancer" -- the following 5 reasons additional reasons to be bullish now assume positive top-line results and what it means for shareholders.

Of course, all of this completely depends and anticipates top line data early next year being positive or the CLSN stock price will take a dramatic hit. This is a binary speculative event that could make or break CLSN. Make no mistake about it -- failure on the Phase III trials would cause CLSN to take a hit. Despite this very real risk, there are many reasons to be bullish.

Source: Seeking Alpha via yahoo! Finance; 5 More Reasons To Be Bullish On Celsion Now, written by Alex Heisenberg.
---

Binary event is the key, with the second key being, we don't know exactly when in Jan we get the results. That means elevated vol (binary event) and a confused Skew from which we can draw our own probabilities in terms of best guess of release of data.

Let's turn to the Skew Tab, below.



We can see how elevated Jan and Feb are to Dec -- so the option market reflects a much greater likelihood that the event (binary news) comes out after Dec expiry. We can also see that Feb is elevated to Jan, so the option market reflects a greater likelihood that the news comes out after Jan expiry but inside Feb expiry.

Let's turn to the Options Tab and start putting some probabilities together -- both for date of news and probability of total collapse (bankruptcy).



Probability of Timing:
Jan vol is ~230%, and Feb vol is ~294%. A back of the envelope probability calculation would say the odds of the release of news in Jan are 230/(230 + 294) and, of course, the odds for Feb are 1 - P(Jan). So, in English, the option market reflects ~44% chance the news is out in Jan and 56% chance the news is out in Feb. Now, in all fairness, this has so many flaws in its logic I could write an entire blog on it -- but this is just quick math -- to get a feeling for the timing of this event.

Bottom line: The Skew tab clearly reflects that there is a greater likelihood that the event (binary news) occurs in Feb rather than Jan, but that there is some ambiguity.

We can also look to the Feb "disaster" puts ($1 strike). The mid-market value is ~$0.225. A sale at that price yields a max loss of $0.775. The max gain/max loss ratio gives us another back of the envelope result -- the odds are ~1/4 that the company goes bankrupt off of this news by Feb expiry. Again, there is an entire blog's worth of assumptions that are made here in using this methodology, but this is how we do it quickly on the floor.

Bottom line: There is a non-trivial chance that bad news means CLSN is no more.

Also interesting are some of the spreads on the board. I personally sold the Feb 2.5/2 put spread @ $.25. That makes a max loss / max gain of 1:1 (.25:.25). Back of the envelope, the price for that spread reflects a 50/50 chance that the company trades below $2. My trade (a sale of those odds) is a belief that the "real" odds are in fact lower (I sold a 50/50 chance). You can do this kind of analysis on literally hundreds of permutations.

For the very probability happy traders, you can do the same in a calendar spread and then make use both of the likelihood of news coming out in Jan expiry (or Feb) with strike prices and diagonals.

For what it's worth, the largest trade I see today is a purchase of the Feb 4.5/2 put spread for $1.55. That's obviously a bet to the downside.

The inarguable fact is that this news is huge for CLSN -- good or bad.  As always, I hope the company succeeds -- let's remember this isn't just a stock, it's a shot at curing cancer.

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Manitowoc (MTW) - Depressed Vol Nears Annual Low; But Why Right Now?

MTW is trading $14.82, up 2.2% with IV30™ up 2.0%.The LIVEVOL® Pro Summary is below.



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The Manitowoc Company, Inc. (MTW) is a multi-industry, capital goods manufacturer. MTW operates in two markets: Cranes and Related Products (Crane) and Foodservice Equipment (Foodservice).

This is a quick vol note -- I'm trying to note some lesser known names where vol has collapsed of late in a world / market where vol probably won't be collapsing.... I found MTW using a real-time custom scan. This one hunts for depressed vols.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 20
IV30™ Percentile LTE 10
Average Option Volume GTE 1,200

The goal with this scan is to identify short-term implied vol (IV30™) that is depressed to its own annual history (at most in the 10th percentile). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), and I want a minimum vol level so I don't pick up any boring ETF’s (or whatever). The stock price requirement helps me identify names that have enough strike prices to trade or spread.

The MTW Charts Tab (one-year) is included (below). The top portion is the stock price the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



On the stock side we can see that awesome rise in late Dec 2011 to mid-Feb of 2012, when the stock rose from a 52wk low of $8.30 to a 52 wk high of $16.97 in just a couple of months. What isn't pictured here is that the stock was ~$23 in May of 2011 and came all the way down to that $8.30 level before rebounding. So, in English, this stock can move by 50% / 100% increments in a matter of months.

I've included an IV30™ chart (one-year) below to better isolate the vol move.



We can see how elevated the implied was a year ago and how quickly it dropped while the stock was ripping up (essentially doubling in three months). We can also see the dramatic decline in the implied of late after earnings. The 52 wk range in IV30™ is [41.92%, 90.68%], putting the current level in the 1st percentile -- i.e. right above the annual low.

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



Across the top we can see the monthly vols are priced to 42.08%, 45.79% and 51.49%, respectively for Dec, Jan and Mar. The vol in general just feels low right now -- not only b/c of the obvious annual comp, but b/c of how the stock tends to move and b/c of the fiscal cliff and b/c of Europe and b/c.... know what I mean?... No?....

This is trade analysis, not a recommendation.

Amarin (AMRN) - Bio-tech Day of Reckoning Approaches; Vol Elevates, Skew Points to Upside Risk

AMRN is trading $11.30, up 7.7% with IV30™ up 20.9%. The LIVEVOL® Pro Summary is below.



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Amarin Corporation plc (Amarin) is a late-stage biopharmaceutical -company with expertise in lipid science focused on the treatment of cardiovascular disease.

This is a vol and stock note on a bio-tech with impending news due out soon with some awesome skew. Here's the news:

---
With Amarin's (Nasdaq: AMRN) new triglyceride-lowering drug Vascepa approved and potentially ready for launch starting in 2013, some decisions have to be made now about how the drug is going to be marketed -- and who's going to do it. Many investors want to see a buyout so that a drugmaker with a larger marketing department can more easily promote Vascepa. However, with the drug's new chemical entity, or NCE, status still up in the air, it seems as though buyout negotiations are on hold. This means that Amarin might be launching this drug on its own.

Source: The Motley Fool via Yahoo! Finance Why Do Amarin Shareholders Want a Buyout?, written by Max Macaluso, Ph.D. and David Williamson.
---

That article also has a great video which explains the three scenarios for AMRN:
(1) Buyout
(2) US partner with deeper pockets to market
(3) Do it yourself -- build sales team, build a marketing campaign (which means raise money and create dilution, likely).

That same video does point out that if scenario #3 is the only way to go, that AMRN's management does have experience in this same field, so it's still a viable and semi-attractive alternative. Of course, everyone long the stock loves a buy-out...

Let's turn to the Charts Tab (one year) below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



On the stock side we can see a nice return over the last year from $6.73 to now over $11.  Looking back two years, the stock is up from $3.61. So, shareholders of longer-term horizons have done well with AMRN and have reason to believe that they will continue to do well in the future.

To examine the vol I have included a two-year IV30™ chart, below.



We can see how elevated the implied has gotten over the last couple of years, so the level today is high, but not out of the ordinary. The 52 wk range in AMRN IV30™ is [62.95%, 161.50%], putting the current level in the 64th percentile.

But, it's the Skew Tab (below) that tells the story.



We can see a few phenomena:
(1) The Nov30 weekly options show an extreme upside skew reflecting greater upside potential than downside risk in the very near-term.

(2) the ATM vol in Dec is the highest of all three expiries pictured, reflecting that the risk of "news" is greatest in the Dec cycle.

(3) Dec also shows an upside skew and a large vol diff has opened up between the Dec and Jan'13 upside calls.

Finally, let's turn to the Options Tab.



Across the top we can see the vols are priced to 99.53%, 125.15% and 119.82% for Nov30(W), Dec and Jan'13, respectively. The highest risk is priced into Dec, though Jan'13 is right behind it. What's so interesting is the different pricing in the OTM calls (see Skew Tab). The option market certainly reflects elevated vol in the near-term, but in particular, upside risk (potential). This will be a very interesting one to watch unfold and I would not discount the downside risk, even though the skew points the other way.

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Best Buy (BBY) - The Whole Story; How a $26 Bid Delay Might Leave the Company at Zero

BBY is trading $11.94, down 13.2% with IV30™ down 14.1%. The LIVEVOL® Pro Summary is below.



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Best Buy Co., Inc. is a multinational retailer of consumer electronics, computing and mobile phone products, entertainment products, appliances and related services.

With BBY diving again off of earnings and the mysterious potential buyout looming from the former Chairman at $26, I though it was a good time for another update.

The first post I published regarding his wild ride was on 7-2-2012; sort of a pre-cursor to the bigger news. You can read that post here:
Best Buy (BBY) - Stock and Vol Up on LBO "No" News

Back then, the stock was trading just under $22. Here's that Symbol Summary:



Then, on 8-29-2012, I wrote this: Best Buy Co. (BBY) - Options Reflect Upside Potential in Near-term; Vol Diff Gaps Open to Upside

At the time of the 8-29-2012 post, BBY was trading above $18. I have included the Symbol Summary from that day, below:



Here's the news that started this story and a bunch of headlines / snippets to catch you up if you're not already familiar:

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(Reuters) - Best Buy Co Inc's (BBY.N) former Chairman Richard Schulze is not expected to present a buyout or other proposal to the company's board anytime soon, a person familiar with the situation said.

Media reports said Schulze was close to presenting an offer for the consumer electronics chain. Discussions around a leveraged buyout of the company are still in the early stages, the person said.

Source: Reuters via Yahoo! Finance; No bid by Best Buy ex-chairman to come soon: source, reporting By Nadia Damouni; editing by Gerald E. McCormick.
---

So that was sort of no news with news expected soon, but denied. But here are some headlines from Briefing.com in chronological order (Provided by Briefing.com (www.briefing.com)):

06-Jul-12 15:23 ET: Best Buy to layoff 2400 employees - CNBC

11-Jul-12 09:33 ET: HHGregg at a 3.5 year low following Q1 warning and FY13 guidance cut, now off ~32% (7.80 -3.74) -Update BBY -6%

13-Jul-12 09:42 ET: Best Buy trading lower off the open; Hearing cautious comments at Cleveland Research

30-Jul-12 08:44 ET: Best Buy spikes to $20 then comes back to ~$19 following renewed takeover reports;

30-Jul-12 08:43 ET: Best Buy founder Schulze recruting executive team for buyout - Bloomberg

06-Aug-12 08:35 ET: Best Buy Founder Richard Schulze confirms proposal to acquire BBY for $24.00 to $26.00 per share

Richard Schulze, Founder and former Chairman of BBY, submitted a written proposal to the Best Buy Board of Directors to acquire all of the outstanding shares of the company that he does not already own for a price of $24.00 to $26.00 per share in cash. The purchase price, which is based on current public information and is subject to due diligence, represents a premium of 36% to 47% to Best Buy's closing stock price of $17.64 on August 3, 2012. Schulze is Best Buy's largest shareholder, controlling 20.1% of Best Buy shares.
---

And finally, the news on 8-29-2012:

---
29-Aug-12 07:08 ET: Best Buy: Buyout feasible albeit unlikely - Oppenheimer

OpCo notes clients continue to ask whether the firm believes former BBY chairman Richard Schulze will prove successful in his attempt to take the Co private. The BBY situation is clearly fluid. Shares are likely to remain susceptible to an ongoing deluge of data from BBY and its potential suitors. In the end, firm views a deal to purchase Best Buy as unlikely. Ample cash flow and a still healthy balance sheet suggest that BBY could support the added leverage associated with a leveraged buyout (LBO). OpCo believes, however, that potential private equity buyers will ultimately balk at a deteriorating business model that is increasingly falling victim to the inroads of new non-traditional CE competitors and a weak product cycle.

Provided by Briefing.com (www.briefing.com)
---

Back then, $26 seemed like a reasonable premium to take the company over. Now... well... How about this news today:

---
Best Buy Co. (NYSE:BBY) founder Richard Schulze faces a looming deadline to review the firm’s financials as a part of his proposed takeover and he is now collaborating with three private-equity firms, including Cerberus Capital Management, in conducting due diligence. According to inside sources who wish to remain anonymous, Schulze has requested an additional 30 days for the procedure, even though he and the advisor firms have been evaluating the data since September. The company granted him 60 days for a proposal upon his announcement that he would bid as much as $26 a share on August 6th.

Source: Wall st. Cheat Sheet via Yahoo! Finance Best Buy Founder Wants More Time, written by Mark Lawson.
---

All I can say to that is, you're damn right he wants more time, the stock is cratering and $26 seems almost ridiculous at this point.

Let's turn to the Charts Tab (two-years) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



On the stock side we can see the cataclysm that has been the last two years. On 11-22-2010 BBY closed at $44.86. As of this writing the stock has had a two-year return of -73%. The chart makes it quite apparent that the levels reached today are multi-year lows.

I have included a two-year vol chart (IV30™ only), to better examine that trend.



As the stock has been falling to new lows, the implied has been rising to new highs. The dip today is off of the earnings release, but watch it climb again if the news flow stays the same... That is bad and with a lot of uncertainty.

Looking to the Skew Tab, we can see some interesting risk reflected by the option market.



Note how the Dec options show a decidedly upside skew though the ATM vol is almost identical to Jan'13 (look at the $12 strike). That is, the option market reflects greater upside risk (potential) than downside risk. The Jan'13 options show a rather flat skew and the Mar'13 options show a "normal" skew, with the OTM puts priced to higher vol the ATM options and OTM calls.

In English, the upside potential -- with breath held, is reflected in the Dec expiry. That Schulze due diligence completion and the result could be gigantic for BBY as a going concern.

Finally, let's turn to the Options Tab.



We can see the monthly vols are priced to 79.15%, 79.24% and 71.80% for Dec, Jan'13 and Mar'13, respectively. But, again, look at the skew difference between the Dec options and Jan'13 to the upside. While Dec and Jan'13 ATM vol are essentially the same, the Dec/Jan 17 call spread (for example) shows a 13 vol point difference (Dec elevated to Jan'13). On the other side, the Dec/Jan'13 9 put spread shows a ~4 vol point diff in favor of Jan'13 -- so totally backwards from the calls.

Dec may be make or break time for BBY and I'm guessing the board in retrospect would liked to have jumped to accept the $26 bid made by Schulze a few months ago. Now the business may find itself trying to stay above zero.

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Barclays (BCS) - Stock up 70% and Vol Hits Annual Low. Have the Mighty Fallen and Risen that Much?

BCS is trading $15.83, up 5.7% IV30™ down 10.2%. The LIVEVOL® Pro Summary is below.



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Barclays PLC (Barclays) is a global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services.

This is a quick vol note and really just a reminder of how quickly vol can drop in a name even when it has been embroiled in controversy. Once the news is out and controversy digested, then things are often times back to... ya know... normal.  Or is this normal?

Let's look to the Charts Tab (one year) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



On the stock side we can see the gaps down and eventual drop to single digits for BCS stock. Even more abrupt has been the recovery. The stock rose from a close of $9.31 on 7-25-2012 to now just under $16, or a 70% rise in less than four full months... Incredible... The 52 wk range in stock price is [$8.96, $16.17], so the stock is flirting with an annual high.

I've included just an image of the IV30™ (on year), below.



On the vol side we see how elevated the implied was several months ago and how low it has gotten of late. The 52 wk range in IV30™ is [33.87%, 87.04%], putting the current level in the new annual low category. My how the mighty have fallen and risen. Again, incredible.

Let's turn to the Options Tab for completeness.



We can see across the top the monthly vols are priced to 33.77%, 37.01% and 38.87% for Dec, Jan'13 and Mar'13, respectively. Note that Jan'13 vol is even lower than Dec vol. This is a great reminder of how often in finance, "calmer heads prevail." This may also be an example of vol that is too low... right?... Or no?...

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OfficeMax (OMX) - Stock Reaches New Annual High, But Reasoning is... Different. Is Vol Too Low?

OMX is trading $9.48, up 15.2% with IV30™ up 8.6%. The LIVEVOL® Pro Summary is below.



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OfficeMax Incorporated (OfficeMax) is engaged in both business-to-business and retail office products distribution. The Company provides office supplies and paper, print and document services, technology products and solutions and office furniture to large, medium and small businesses, government offices and consumers.

This is a depressed vol note in a stock popping and continuing a run of days each
making new annual highs.

Let's start with the Charts Tab (one-year), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



On the stock side we can see the awesome rise y-o-y and even more notably, over the last couple of months and weeks. Here are some return stats:

Y-O-Y: $5.31 --> $9.48 +78.5%
7-25-2012: $4.27 --> $9.48 +122%
10-24-2012: $7.19 --> $9.48 +31.8%

The 52 wk range in stock price is [$4.06, $8.75], so obviously the price rise today is well into new annual high territory. Here's the news pushing the stock over the last few days:

---
11-16-2012
(Reuters) - Shares of U.S. office supplies chain OfficeMax Inc (OMX.N) rose as much as 29 percent on Friday on expectations the company will benefit from an initial public offering of wood products maker Boise Cascade LLC, in which it holds a 20.4 percent stake.

[...]

"This gain is expected to be recognized in earnings as the company's investment is reduced," OfficeMax said in a filing with the Securities and Exchange Commission on November6.

Source: Reuters via Yahoo! Finance; OfficeMax shares soar on expected gain from Boise Cascade IPO, written by Ranjita Ganesan in Bangalore; editing by Ted Kerr.
----


So that's today... But before today,the stock climb was earnings related...

---
11-6-2012
What: Shares of office-products supplier Office Max (NYSE: OMX) jumped as much as 18% today after a better-than-expected earnings report.

So what: Like its peer Office Depot (NYSE: ODP) , whose shares were also flying today, Office Max was able to beat estimates by cutting costs. Revenue, nonetheless, slipped 1.7% from a year ago, but adjusted EPS increased slightly to $0.27, topping estimates of $0.25. Same-store sales dropped by 2.1%. Shares of the retailer have come roaring back in the past few months, doubling since August, as some see it as a value play.

Source: The Motley Fool via Yahoo! Finance; Why Office Max Shares Soared, written by Jeremy Bowman.
---

And then even before that...

---
9-14-2012
What: Shares of office supply chain OfficeMax (NYSE: OMX ) rallied as much as 13% today, following the finalization of the extinguishment of non-recourse debt tied to Lehman Brothers.

So what: It’s a little confusing, but in 2004, OfficeMax received an $871.5 million Lehman-backed note in connection with a timberlands sale. OfficeMax turned around and monetized the note by issuing securitization notes through a special purpose entity that was backed by Lehman Brothers. Lehman’s bankruptcy in 2008 constituted a default under the terms of the note, and a U.S. Bankruptcy Court order will finally allow the extinguishment of the debt from OfficeMax’s books. OfficeMax expects to report a one-time gain of $671.1 million in the third-quarter, and anticipates the increased balance sheet clarity will help investors better understand the company.


Source: The Motley Fool via Yahoo! Finance; Why OfficeMax Shares Popped, written by Sean Williams.
---

Seems like lots of good stuff, but is it really? The IPO thing today is a one-time event. The debt resolution was a one-time event and the cost cutting feels like it's not a perpetual event. Here's where it gets interesting...

Let's turn to the vol chart for the last year (IV30™).



What we can see is how depressed the vol is relative to its own annual history. A vol decline as stock rises is common place, but let's not lose sight if why the stock is rising -- these aren't long-term trends (IMHO) -- these are sort of, one offs in succession. The 52 wk range in IV30™ is [40.99%, 91.74%], putting the current level in the 26th percentile.

So as the stock is making new annual highs on one-time events and rather questionable earnings (in terms of repeat-ability), the vol is dropping? This feels a little... off, no?

Finally, let's turn to the Options Tab for completeness.



Across the top we can see the monthly vols are priced to 54.56% for Dec and 54.25% for Jan'13 -- so still in the bottom quartile of annual 30-day vol. The options have been very active today with more than 7,200 contracts trading on total daily average volume of just 544. The Stats tab is included below.



Note the net premium and rising vols by month (in the Options tab across the top) -- this is the circumstantial evidence that vol buyers are coming in today. Perhaps the 26th percentile is too low? Ya know... or not...

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MAP Pharma (MAPP) - Development Stage Bio-tech in Unchartered Waters – FDA Silence is Deafening as Vol Explodes and Stock Tumbles on Nothing…

MAPP is trading $12.42, down 5.9% with IV30™ exploding up 59.8%. The LIVEVOL® Pro Summary is below.



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MAP Pharmaceuticals, Inc., is a development-stage company. As of December 31, 2011, the Company was focusing to advance its product candidate, LEVADEX (MAP0004) orally inhaled migraine therapy, which is an orally inhaled version of dihydroergotamine mesylate (DHE), for the acute treatment of migraine.

This is a vol and order flow note in a stock that has some absolutely bewildering news and risk surrounding it. First, let’s look at the Stats Tab and day’s biggest trades (below) and then we’ll get into the news.





We can see that over 8,800 option contracts have traded already on a total daily average option volume of just 358. The Dec 10 puts are the most active line, with nearly 4,800 changing hands.

So what’s the news? Check this out:

MAPP re-submitted to the FDA for their novel migraine drug (inhaler) Levadex on Oct. 16th, 2012. This was a second attempt at approval following an initial rejection letter in March of this year. But, FDA rules state that the agency has 14 days to accept a re-submission and assign a new approval date decision. So… 14 days after Oct 16th is Oct 30th. Today is Nov 15th and MAPP has still heard nothing from the FDA – I mean zero communication. (Source: MAP Pharma’s Awkward FDA Silence; TheStreet.com via Yahoo! Finance, written by Adam Feuerstein).

Let’s look at the Charts Tab (six months), below and we’ll see some incredible stuff. The top portion is the stock price the bottom is the vol (IV30™ - red vs. HV20™ - blue vs. HV180™ - pink).



We can see that on 10-31-2012 (the latest date that MAPP should have received some news from the FDA), the stock closed at $15.42. As of this writing, the stock is down ~19% from that date, with an abrupt drop coming in the last week. The 52 wk range in stock price is [$11.11, $17.92], surprisingly small for a small bio-tech development company with FDA submissions.

On the vol side we can see the incredible rise in the implied as the stock has been dropping. On 10-31-2012, the IV30™ closed at 48.56%. As of this writing, the IV30™ is up 134% from that date, with a 60%+ move today alone. The 52 wk range in IV30™ is [34.74, 184.61], putting the current level in the 55th percentile. IMHO, as long as there is no news from the FDA, that vol will rise – and perhaps rise abruptly like today.

Let’s turn to the Skew Tab, below.



We can see how elevated Dec is to the back months, so the option market does reflect risk (read: FDA news) by Dec expiry. I would hope so?...

Finally let’s turn to the Options Tab.



Across the top we can see the monthly vols are priced to 118.45% and 92.32 for Dec and Mar, respectively. Again, that vol diff is the reflection from the option market that “some news” is likely coming in the near-term. In the meantime, check out some specific prices. The Dec 7.5 puts are priced to $0.40 fair value or ~160% vol – whoa. The Dec 17.5 calls are priced to $0.25 fair value or ~94% vol. Keep in mind the 52 wk range for the stock is [$11.11, $17.92],

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