Thursday, April 7, 2011

American Superconductor (AMSC) - Vol Gaps Open on 50% Stock Collapse

AMCC is trading $14.40, down 0.5% with IV30™ down 1.2%. The LIVEVOL™ Pro Summary is below.


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American Superconductor Corporation is a power technology company offering a range of technologies and solutions spanning the electric power infrastructure from generation to delivery to end use

This stock gapped down 50% yesterday on a revenue guidance that included the rejection of a gigantic order. Here's the news:

The wind-turbine components maker American Superconductor Corp. (AMSC) fell the most in two decades after its largest customer refused to accept a shipment and its stock was downgraded.

The stock slumped about 42 percent to $14.47 in Nasdaq Stock Market trading today, the biggest intra-day decline since it was listed in 1991. It fell as low as $12.54, down about 50 percent. The Devens, Massachusetts-based company said yesterday that it expected to report a net loss for the fiscal fourth- quarter after Sinovel Wind Group Co. refused to accept contracted shipments.
Source: Bloomberg, written by Randall Hackley and Marc Roca

I wrote about this company on, so no specific trade analysis here. The huge move yesterday has pushed the front month vol high and now the company shows up on the calendar spread custom scan I built -- 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.

Let's look to the Skew Tab.

Not only is the front month well elevated to the back but the front shows a parabolic skew -- so both the upside and downside calendar opens up further.

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).

The Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

We can see the stock's collapse yesterday as well as the IV30™ pop.

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

Without really delving into specifics, some sort of skew trade (intra-month) or calendar seems worth examining. Of course, the stock has just been cut in half, so the elevated vol reflects the risk that the stock can move fast and furious. Read: the month-to-month vol disparity isn't an accident.

This is trade analysis, not a recommendation.

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