Friday, June 18, 2010

Wabco Holdings (WBC) - Buying Cheap Vol on Stock Rise

WBC is trading 34.70, up 6.3% with IV30™ up 8.1%. The LIVEVOL™ Pro Summary is below.

The company is a provider of electronic, mechanical and mechatronic products for the commercial truck, trailer, bus and passenger car manufacturers.

The company has traded over 6,293 options on total daily average option volume of just 251. The action is in July; put buyer and call spread seller - both short deltas. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates that all the lines are mostly opening (trade volume >> OI). From what I can see, the puts are both purchases, the 35 calls are sales and the 40 calls cover that up.

The Skew Tab snap (click to enlarge) illustrates the vols by strike by month. I have highlighted the four strikes in play. The skew looks pretty normal.

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

You can see the stock has risen sharply recently. Its 52 wk range is [$16.00, $36.92], so it's approaching that high. The trades today are bearish and long vol. Also note that the HV20™ (blue line) has dipped below the IV30™ (red line) as the stock has jumped. So this trade is buying "cheap" vol ceteris paribus and betting on a stock reversal. Note the vol is UP today even with the stock price gain.

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment