Thursday, May 19, 2011

CBOE Holdings (CBOE) - Jun Skew Shaped to Trade

CBOE is trading $28.27, up 1.5% with IV30™ down 0.3%. The LIVEVOL® Pro Summary is below.


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CBOE Holdings, Inc. (CBOE Holdings) is one of the options exchanges in the United States.

I wrote about this one for, so no specific trade analysis, but it's still an interesting vol story, particularly the shape of the vol curve in Jun. Let’s look at the Skew Tab from Livevol® Pro to examine the strike-by-strike vols.

The ATM vol is the lowest in the month with an increasing skew to the downside (which is normal) and an increasing skew to the upside (which is not as normal).

Let’s look to the Charts Tab (below) to analyze the vol level relative to historical. 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 recent rise out of earnings. Interestingly, at the same time, the IV30™ has increased to the point where it’s now trading above both the short-term and long-term historical vols (HV20 and HV180, respectively). Specifically:

IV30™: 34.21
HV20: 18.10
HV180: 30.09

So the vol difference between the implied and historical is significant. Or, in Engish, owning naked vol here is expensive relative to where it has been.  Let’s turn to the Options Tab.

The options are priced to the ATM for back spreaders (option owners) and to the OTM or front spreaders (option sellers). The uptrend in the stock has made the upside bid and the downside is bid just due to normal skew phenomenon. You can read about that here: Understanding Option Skew.

This is trade analysis, not a recommendation.

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