Wednesday, November 3, 2010

Entropic (ENTR) - Time Spread in Play

ENTR is trading $8.40, up 1.2% with IV30™ up 11.8%. 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. You can get your trial by following the directions here: Click for Free Trial Offer

ENTR is a semiconductor company that designs, develops and markets systems solutions to enable connected home entertainment.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price >= $5
Sigma1 - Sigma2 >= 8
Average Option Volume >= 1,000
Industry != Bio-tech
Days After Earnings >=5 <=70
Sigma1, Sigma2 >= 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.

Looking to the Skew Tab (below), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).

Now we can turn to the Charts Tab, vol only (below). IV30™ - red vs HV20™ - blue vs HV180™ - pink.

Note how the IV30™ has popped past both the short-term realized and the long-term realized.

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

Note that Nov vol is ~90 while Dec is ~76.

Potential Trades to Analyze
There are couple ways to play this, one would be a straight vol sale, the other is calendar spread.

1. Buy the Dec 7.5/10 strangle for $0.85 and sell the Nov 7.5/10 strangle @ $0.40 for a total debit of $0.45. That purchases ~74 vol and sells ~89 vol.

2. Sell the Nov 7.5/10 strangle naked, risky. I actually like the calendar better, oddly enough.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:

No comments:

Post a Comment