Tuesday, August 17, 2010

J. Crew Group (JCG) - Dec Put Spreader; Sep Has the Vol

JCG is trading $33.69, up 2.5% with IV30™ down 6.6%. The LIVEVOL™ Pro Summary is below.

The news was in ANF: Abercrombie reported inventory jumped 47% on a per-square-foot basis, and margins continued to fall amid discounts. Interesting that JCG vol is down on this news.

The company has traded over 7,600 options on total daily average option volume of just 2,112. All but 351 contracts have been puts. The largest trade has been a Dec 25/30 put spread purchase for $1.30. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates that the puts on both legs are opening (compare OI to trade size). The Sep 35 puts were bought today and are closing that long OI.

The Skew Tab snap (click to enlarge) illustrates the vols by strike by month.

You can see how much lower vol is in Dec than Sep (the green curve is entirely below the yellow one). Earnings are in the Sep cycle, but there should be two earnings in the Dec cycle, including the "Christmas" earnings report.

I like the put spread better in Sep, and I like it 1 x 2. Buy 1 30 put and sell 2 25 puts for a total debit of ~$0.45, safe down to a stock price of $20.

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV90™ - green vs HV90™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV30™ vol difference.

The long term vols match up right on top of each other. Alternatively, the IV30™ is 50.5 and the HV20™ is 42.5. The 52 wk range in the stock is [$28.01, $50.96]. This bet, if done without stock, looks to see the stock drop below it's year low if held to expo. It's more of a vol play otherwise.

This is trade analysis, not a recommendation.

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