Monday, January 3, 2011

General Motors (GM) - Sup With That Market Cap?

GM is trading $37.44, up 1.6% with IV30™ up 10.3%. The LIVEVOL™ Pro Summary is below.


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Before I get started, on a side note, why is GM's market cap $55 billion?...

I found this stock using the same custom scan for HRB - it searches for names where IV30™ is up at least 10% today. The scan details are below with a snapshot if you want to build it yourself in Livevol Pro.

Custom Scan Details
Stock Price >= 10
Average Option Volume >= 1,200
Days After Earnings >= 5 and <= 60
IV30™ Percent Change >= 10%
IV30™ >= 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.

The GM Charts Tab (vol only) is included (below): (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

IV30™: 28.73
HV20™: 19.69
HV180™: 19.26

So IV30™ is actually elevated to both the short-term and long-term realized vols. Keep in mind, this issue just started trading recently, so there ain't a whole lot of data for this "New GM."

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

I love these rickety skews b/c it brings up a bunch of trading opportunities. One caveat for this one - the vol diffs are actually pretty small in absolute size and once you account for the width of the option markets, a lot of the fun goes away.

Let's look to the Options Tab.

Possible Trades to Analyze
1. The stock has moved $0.64 today and the Weekly straddle is priced @ ~$1.05. If you're in the mood for a gamble buy this elevated vol in hopes that it moves in the next few days:
Buy the Jan (W) 37 straddle for $1.05.

2. The exact opposite of #1, sell that elevated vol.
Sell the Jan (W) 37/38 strangle @ $0.50 or ~ 28.5 vol.

3. More Risky:
Buy 1 Jan (Monthly) 37 call for $1.20.
Sell 1 Jan (W) 38 call @ $0.25.
Sell 1 Jan (W) 37 put @ $0.25
Sell 1 Jan (Monthly) 38 all @ $0.65.
This yields a $0.15 debit and if GM plays nice for the next few days, it leaves a $1 call spread for just $0.15 in Jan. Of course, you can also get your face ripped off if this moves size.

This is trade analysis, not a recommendation.

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1 comment:

  1. I appreciate your post, thanks for sharing the post, i would like to hear more about this in future