Tuesday, February 15, 2011

NASDAQ Stock Market (NDAQ) - Elevated Vol on NYSE News

NDAQ is trading $28.22, down 4.8% with IV30™ up 5.0%. The LIVEVOL® Pro Summary is below.


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The NASDAQ OMX Group, Inc. is a global exchange group that delivers trading, exchange technology, securities listing, and public company services across six continents. i.e. this is NASDAQ.

I posted an article on NDAQ for TheStreet.com, so I can't give any specific trade analysis, but I find it to be interesting enough that it's still worth looking at.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months. But the spread is huge and there's some news.

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).

The front is elevated to the back -- that's normal this close to expo. But the vol difference is actually gigantic. As of this writing, Feb vol is 35 points above Mar -- or said differently, Feb is ~88% higher than Mar.

Now we can turn to the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Two things I note:
1. The stock is moving up of late -- it's actually up 50% in the last few months.
2. The IV30™ is absolutely exploding with the stock price.

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

Allow me to quote myself from The Street.com article:
"I believe the vol in NDAQ has been spiking based on the takeover/merger news in NYSE Euronext and Germany’s main stock exchange company, Deutsche Börse. Whether or not that merger goes through, it takes NDAQ to the top of the list of potential takeover candidates."

Without taking specifics, I can see some OTM options where Feb (4 days left) is more nearly half of the Mar options. That's something...

This is trade analysis, not a recommendation.

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