ACE - Bullish Earnings Bet

ACE is trading $61.83, up 1.6% with IV30™ down 9.6%. The LIVEVOL® Pro Summary is below.



-------------------------------------------------------------------


For a limited time we are offering a FREE real-time trial to Livevol® Pro for non-professional traders. Click for Free Trial Offer
-------------------------------------------------------------------

ACE is a global insurance and reinsurance organization, serving the needs of commercial and individual customers in more than 170 countries.

This is just a quick note on some order flow in an earnings month.

The company has traded 6,885 contracts on total daily average option volume of just 619. The largest trade, which accounted for 6,000 contracts, was a May 55/65 risk reversal (sell puts/ buy calls). The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls and puts are mostly opening (compare OI to trade size). The largest OI in front two months is just 2,724, so this is a large order. I don't really see any large stock orders at the time of this trade and the total stock volume is actually below average, so this feels like it might be unhedged (unless it's a hedge in and of itself to a short stock position).



The Skew Tab snap (below) illustrates the vols by strike by month.



The skew has maintained a pretty normal shape -- it would have been nice if the upside in May was bid as that might have been interesting to examine as a strike to spread around.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



The vol is still elevated to the short-term and long-term trend in the stock (realized movement), but IV30™ is dipping after it jumped on general unrest in the world.

As I mentioned at the top, this is a large trade (~10x daily average volume) in a month when earnings are due out. It might be worth writing this one down and seeing if any more large one sided order flow (bullish in this case) continues to stream in on the earnings month.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

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

Energy XXI (EXXI) - Elevated Vol

EXXI is trading $31.67, up 2.0% with IV30™ down 6.2%. The LIVEVOL™ Pro Summary is below.



-------------------------------------------------------------------


For a limited time we are offering a FREE real-time trial to Livevol® Pro for non-professional traders. Click for Free Trial Offer
-------------------------------------------------------------------

Energy XXI (Bermuda) Limited (Energy XXI) is an independent oil and natural gas exploration and production company with operations focused in the United States Gulf Coast and the Gulf of Mexico.

I found this stock using a real-time custom scan. This one hunts for high vols.

Custom Scan Details
Stock Price >= $7 and <= $70
IV30™ - HV20™ >= 10
HV180™ - IV30™ <= -8
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >=10 and <=60


The goal with this 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™). 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 IV30™ simply because earnings are approaching.

The EXXI 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).

 



We can see:
IV30™: 49.05
HV20: 36.42
HV180: 40.31

So, IV30™ is elevated relative to the short-term and long-term realized movement of the stock.

Let's check out the skew.



Let's look to the Options Tab (below).



Possible Trades to Analyze
1. To analyze selling the vol:
Sell the Apr 31/32 strangle @ $2.60.
Buy the Apr 29/34 strangle for $1.30.
Collect $1.30 to risk $0.70 and bet on a small move in EXXI to Apr expo.

2. The opposite view is also worth examining; specifically if the vol is elevated, maybe the stock is going to move:
Buy the Apr 31/32 strangle for $2.80 and bet on a stock move (or vol near-term increase).

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

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

Sprint Nextel (S) - AT&T Buys T-Mobile; Who Buys Sprint?

S is trading $4.24, down 16.1% with IV30™ up 6.7%. The LIVEVOL® Pro Summary is below.



-------------------------------------------------------------------


For a limited time we are offering a FREE real-time trial to Livevol® Pro for non-professional traders. Click for Free Trial Offer
-------------------------------------------------------------------

The industry news is this:
---
AT&T Inc. announced an agreement to purchase T-Mobile USA from Deutsche Telekom AG for $39 billion in a deal that would create the largest cell phone company in the United States.
Source: EFE News Service (in Livevol® Pro).
---

The company has traded nearly 130,000 contracts in the first two and a half hours on total daily average option volume of just 36,400. Calls have traded on a 2:1 ratio to puts with the largest trade of the day being a purchase of 30,000 May 5.5 calls. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates the action. The May 5.5 calls look to be opening (compare OI to volume). The Apr 4.5 calls are also active with nearly 14,000 changing hands. The existing OI in those call is 44,567 -- I believe that to be long interest and the trades today also look mostly long.



The Skew Tab snap (below) illustrates the vols by strike by month.



The skew is parabolic -- indicating elevated risk to both the upside and downsides. Hmm...

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



Two notable things:
1. The stock drop today.
2. The elevated vol.

So speculators/investors are buying the vol in this company even though it's elevated.

Possible Trades to Analyze
This one has a few ways it can go. Rather than discuss trades to examine, let's look at what might actually happen to the company itself:

1. It gets bought out at some premium that would be lower than it would have been if this deal didn't happen. Read: S becomes a bit more desperate.

2. It gets bought out for more than it would have been if this deal didn't happen if a larger company (say, Verizon) becomes more desperate to swoop up the shrinking field of smaller cell providers. Throw in the possibility of competitive bids with two or more suitors...

3 The company sits here with uncertainty high -- making the elevated vol a sale.

4. The rumor mill gets going -- the stock can pop on takeover rumors and/or drop on rumors that other suitors aren't interested. Similarly, if S releases the "we are actively seeking a strategic sale" and hires a big firm to lead the search (like Goldy, MS or CS) -- that could pop the stock.

5. The most likely: Something unexpected.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

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

Avis Budget (CAR) - Falling, Elevated Vol

CAR is trading $16.22, up 3.3% with IV30™ down 8.8%. The LIVEVOL™ Pro Summary is below.



-------------------------------------------------------------------


For a limited time we are offering a FREE real-time trial to Livevol® Pro for non-professional traders. Click for Free Trial Offer
-------------------------------------------------------------------

Avis Budget Group, Inc. (Avis Budget) provides car and truck rentals and ancillary services to businesses and consumers in the United States and internationally.

I found this stock (like the first one today) using a real-time custom scan that search for elevated vol.

Custom Scan Details
Stock Price >= $7 and <= $70
IV30™ - HV20™ >= 10
HV180™ - IV30™ <= -8
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >=10 and <=60

The goal with this 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™). 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 IV30™ simply because earnings are approaching.

The CAR 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).

 

We can see:
IV30™: 57.95
HV20™: 45.39
HV180™: 45.95

So, IV30™ is elevated relative to the short-term and long-term realized movement of the stock. We can also see that the IV30™ has dipped today (duh) -- but that ~58 ish vol is still well above the short-term and long-term historical vols (HV20 and HV180, respectively).

Let's look at the Skew Tab.



I've included this chart simply to note that although the vol is elevated, and dipping hard today, the skew has maintained a normal shape -- there doesn't seem to be any order flow that's really pushing (or pulling) vol on a strike or set of strikes... which ultimately means, no obvious skew trades to analyze...

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



We can see that Apr and May vols are in the upper 50's while Aug is in the low 50's.

Possible Trades to Analyze
Since there's little goin' on with skew, in order to sell vol it looks like analyzing selling the ATM would be one way to go.
Sell the Apr 16 straddle @ $2.00.
Buy the Apr 14/18 strangle for $0.70.
Risk $0.70 to make $1.30.

I don't see any other trades that really peak my interest, but certainly if you have conviction on the delta side (stock direction), a bunch of call (or put)spreads exist. I think this company may also be a potential takeover candidate -- just something to note and account for in risk analysis.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

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

Assured Guaranty (AGO) - Elevated Vol... Again...

AGO is trading $14.36, up 2.9% with IV30™ up 10.4%. The LIVEVOL™ Pro Summary is below.



-------------------------------------------------------------------


For a limited time we are offering a FREE real-time trial to Livevol® Pro for non-professional traders. Click for Free Trial Offer
-------------------------------------------------------------------

Assured Guaranty Ltd. (AGL) is a holding company that provides, through its operating subsidiaries, credit protection products to the public finance, infrastructure and structured finance markets in the United States, as well as internationally.

There was some news in this company a couple of weeks ago -- specifically, the COO will be resigning at the end of March.

I found this stock using a real-time custom scan. This one hunts for high vols.

Custom Scan Details
Stock Price >= $7 and <= $70
IV30™ - HV20™ >= 10
HV180™ - IV30™ <= -8
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >=10 and <=60

The goal with this 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™). 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 IV30™ simply because earnings are approaching.

The AGO 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).



We can see:
IV30™: 61.60
HV20: 41.54
HV180: 47.54

So, IV30™ is elevated relative to the short-term and long-term realized movement of the stock. It's interesting that IV30™ has been trading above the short-term realized vol (HV20) since December and then before that, since November.

Let's look to the Options Tab (below).



Possible Trades to Analyze
1. Sell Apr vol:
Sell the Apr 15 straddle @ $2.02
Buy the Apr 13/17 strangle for $0.72.
Collect $1.30 to risk $0.70.

2. Sell Jul vol:
Sell the Jul 15 straddle @ ~$4.00
Buy the Jul 13/17 strangle for $2.40
Collect $1.60 to risk $0.40 but risk that AGO stays in a tight range until Jul rather than Apr.

3. Call or Put spreads:
Play it backwards, bet on a stock move rather than stock not moving. AGO has moved $0.41 today, so depending on your delta opinion (stock direction) check out the Apr 13/14 put spread for $0.38 or the Apr 15/16 call spread for $0.34. Both of these spreads sell slightly higher vol than they purchase. Again, this bets on a stock move, rather than trades #1, #2 which bet on a stock "not move."

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

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

UltraShort Yen Shares (YCS) - Vol Exploding, Spec Bet on One-day Move

YCS is trading $14.78, down 1.8% with IV30™ jumping up 22.3%. The LIVEVOL™ Pro Summary is below.



-------------------------------------------------------------------


For a limited time we are offering a FREE real-time trial to Livevol Pro™ for non-professional traders. Click for Free Trial Offer
-------------------------------------------------------------------

The investment seeks to provide daily investment results (before fees and expenses) that correspond to twice (200%) the inverse of the daily performance of the U.S. Dollar price of the Japanese Yen.
Source: Yahoo! Finance

The ETF has traded over 14,000 contracts on total daily average option volume of just 713 with calls trading on a 13:1 ratio to puts. The action has been in the Mar 15 calls and the Apr 15 calls. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the Mar and Apr 15 calls are mostly opening (compare OI to trade size). It's interesting that the action is in the Mar 15 calls which expire tomorrow. It's a spec bet with the potential for a large payoff or an immediate 100% loss.



The Skew Tab snap (below) illustrates the vols by strike by month.



We can see the skew is parabolic in Apr -- upside and downside OTM options are more expensive than ATM options. There is an interesting spike in the May and Aug ATM options.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



The IV30™ was 20.82 exactly 7 calendar days ago, so it has more than doubled in that time. In that same span, the ETF has gone from $16.26 down to the $14.70 range.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

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

SRA International (SRX) - Vol Still Rising in Ambiguous Deal Stock

SRX is trading $26.73, down 0.3% with IV30™ up 0.7%. The LIVEVOL™ Pro Summary is below.



-------------------------------------------------------------------


For a limited time we are offering a FREE real-time trial to Livevol Pro™ for non-professional traders. Click for Free Trial Offer
-------------------------------------------------------------------

I wrote about this stock on 3-9-2011:
SRA International (SRX) - Calls Trade on Pending Takeover Decision

With the vol still rising, I think it's worth another visit.

This one is news heavy:
NEW YORK, March 9 (Reuters) - At least three private equity firms remain interested in SRA International Inc (SRX.N) as the U.S. defense consulting company seeks another set of buyout offers this month, people familiar with the matter said.

Providence Equity, Veritas Capital and General Atlantic remain interested in buying SRA, three people said, adding that the process is ongoing despite lingering doubts about whether Founder and Chief Executive Ernst Volgenau will eventually be a seller.
Source: At least 3 PE firms seen still interested in SRA.

Basically, there seems to be interest from several firms to take the company over/buy it out but the fly in the ointment is the founder who may be unwilling to sell his substantial stake.

Let's start with the Charts Tab (6 months). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



I've highlighted a few things:
1. A couple of stock pops.
2. The IV30™ is rising while the stock has been stuck in "I dunno what's going to happen" land for the last few weeks.

The excitement on 3-9-2011 was echoed with some pretty large order flow. The historical snapshot (from the Charts Tab -- click on the day you want at the bottom on a volume bar) is included below.



We can see the IV30™ rose 4.8% that day, and it's already ~10% higher today from that level. The largest orders were some 30/35 call spreads in Apr and Jun along with a ton of volume in the Mar 30 calls.

The OI in the Mar 30 calls was 5,833, then 6,444 calls traded and the next day the OI jumped to 9,056. So the trades were substantially opening. Looking to the Options Tab we can see the current OI and the vol by month (at the top).



Note that Apr vol is 79 while Jun is ~54 and Sep is ~45. The options market reflects substantial near-term risk (and thus the rising IV30™).

Finally, the Skew Tab snap (below) illustrates the vols by strike by month.



It is odd to me that the upside skew isn't bid (it was on 3-9-2011) -- i.e. the skew now bends down to the OTM calls which is normal, but the news isn't normal for this stock. The elevated vol (risk) has not changed the skew shape so the naked upside buyers aren't really out there, or they aren't forcing market makers to raise the OTM calls more than other strikes.

Possible Trades to Analyze
This one offers a bunch of trades to analyze.

1. A calendar spread between months two and three is on the board. Note that Jun has an earnings release and is still quite depressed relative to Apr.

2. A vol sale of some sort in Apr with covered wings (since the skew hasn't pushed OTM vol too high).

3. Just sit and watch. This is an interesting one. It feels like the downside is more risky relative to the upside. Of course, with vol up more than 100%, they're both quite risky.


This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

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

Entergy (ETR) - Nuclear Energy's Future Shows Near-term Risk

ETR is trading $66.99, down 2.2% with IV30™ exploding up 31.1%. The LIVEVOL® Pro Summary is below.



-------------------------------------------------------------------


For a limited time we are offering a FREE real-time trial to Livevol® Pro for non-professional traders. Click for Free Trial Offer
-------------------------------------------------------------------

Entergy Corporation, together with its subsidiaries, operates as an integrated energy company in the United States. It primarily engages in electric power production and retail electric distribution operations. The company operates through Utility and Non-Utility Nuclear segments.

It's that last sentence that caught my attention. How does the future of nuclear energy look given the news out of Japan?... However it looks, the option markets reflect a LOT more risk, at least in the near term.

The company has traded over 7,000 contracts on total daily average option volume of just 601. The action has been in the Apr 65 puts where over 5,000 have crossed the tape. They look like substantially purchases. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the puts are mostly opening (compare OI to trade size). When looking down the entire option chain for ETR, I don't see any OI even half as large. I don't really see any large stock trades tied to these options, but I do note that the volume is already more than the total daily average -- so stock is active as well.



The Skew Tab snap (below) illustrates the vols by strike by month.



The skew looks quite nice actually -- a normal shape with Apr vol trading higher than Jun and a slight opening of a vol difference to the downside with that order flow in the Apr 65 puts (highlighted in the chart).

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



This is an awesome chart. In the vol portion (bottom), we can see that the IV30™ has ripped from ~15 to now more than twice that since just 3-9-2011. The stock has plummeted over that same time, from as high as ~$74 to now into the mid sixties.

Possible Trades to Analyze
The question here again is simple -- is the vol elevated and therefore expensive (a sale), or is it elevated, but not reflecting high enough risk (i.e. still too low)?

On 3-9-2011 the ATM ($75 strike) straddle was worth ~$4.10 with ~ $0.80 in parity. That straddle is now worth more than $8.

In terms of skew, since I don't see any obvious kinks, I don't see any obvious spreads to discuss. This one would be more of a vol direction (or stock direction) bet than a skew trade.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

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

Exxon Mobil (XOM) - Vol Rise and Skew Formation

XOM is trading $81.05, down 0.4% with IV30™ up 8.8%. The LIVEVOL™ Pro Summary is below.



-------------------------------------------------------------------


For a limited time we are offering a FREE real-time trial to Livevol® Pro for non-professional traders. Click for Free Trial Offer
-------------------------------------------------------------------

Exxon Mobil Corporation (Exxon Mobil) is a manufacturer and marketer of commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics and a range of specialty products... duh...

I found this stock using a real-time custom scan that looks for rising IV30™

The XOM 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).



We can see:
IV30™: 26.19
HV20™: 20.24
HV180™: 17.11

So, IV30™ is elevated relative to the short-term and long-term realized movement of the stock. Obviously, world events are driving the uncertainty in the market, and more precisely, in the energy sector.

Let's look to the Skew Tab.



A couple things to note:

1. The front month is elevated to the back months (which is normal this close to exp).

2. The upside skew in XOM is bid, creating a parabolic (or even 'V') shaped curve.

Let's look to the Options Tab (below).



Note that the Mar/Apr 85 call spread shows a 24 vol point difference. In English, the Mar 85 calls are twice as expensive (in vol) than the Apr 85 calls.

Possible Trades to Analyze
1. Trade the calendar upside skew:
If you're bullish but don't think XOM will go up $5 in the next two days, you can examine the Mar/Apr 85 call spread for $0.63.

If XOM does stay below $85 into Mar expo, this trade can be extended with a sale of the XOM Apr 90 calls at around the same price (maybe) as the Apr 85 calls. That would leave a $5 call spread for less than $0.50 or a better than 9:1 MaxGain:MaxLoss.

2. Trade the calendar downside skew:
If you're bearish but don't think XOM will go down below $80 by Mar expo, you an examine the Mar/Apr 80 put spread for $1.42. This trade sells ~ 10 points higher vol than it purchases. Like #1 above, if the trade works out well into Mar expo, this trade can be extended by selling the XOM Apr 75 puts to create a $5 put spread for ~$0.80 (maybe) creating > 5:1 MaxGain:MaxLoss ratio.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

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