Tuesday, December 14, 2010

New York Times (NYT) - Elevated Vol on Positive Guidance

NYT is trading $9.39, up small with IV30™ up 4.5%. The LIVEVOL™ Pro Summary is below.

There was some interesting news on 12-7-2010. You can read that below:

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 NYT 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™: 61.34
HV20™: 35.62
HV180™: 51.03

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

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

Possible Trades to Analyze
1. Sell the Jan 9 straddle naked @ $1.45. Very risky...

2. Do #1 but purchase the Jan 7.5/10 strangle for $0.65. This yields a net debit of $0.80.

3. Do #1, but purchase the Jan 10 call for $0.45. This yields a $1.00 credit, so there is no upside risk. It is naked downside, starts to lose below $8. If you believe the news will be good going forward (or at least, not bad) based on that guidance (top of article), this trade has a neat little payout in that it sells ~62 vol, has no upside risk and generates a $1.00 credit on a $9.39 stock (or 10.6%).

This is trade analysis, not a recommendation.

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