Tuesday, May 24, 2011

MAKO Surgical (MAKO) - Vol and Deltas After 'Sax' Upgrade

MAKO is trading $31.65, up 0.9% with IV30™ down 0.7% as of ~10am EST. The Livevol® Pro Summary is included below.


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MAKO Surgical Corp. (MAKO) is a medical device company that markets its advanced robotic arm solution and orthopedic implants for minimally invasive orthopedic knee procedures.

I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis, but this is a really cool one -- I do have a position in it.

The recent news in this stock has been all about a conviction upgrade from Goldy. Here’s a news snippet from The Motley Fool:

The medical upstart soared after being added to Goldman Sachs' "conviction buy" list. The analyst sees MAKO "in the early stages of its growth trajectory" despite a healthy run before the bullish note. As quoted on StreetInsider.com this morning, Goldman opined: "We see MAKO emerging as one of the most compelling growth stories in MedTech, with the potential to transform orthopedic surgery through the advent of robotic technologies.
Source: The Motely Fool

Today, the stock appeared on a real-time custom scan. This one hunts for calendar spreads 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 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 start with the Skew Tab (below) to see the month-to-month and line-by-line vols.

The skew shapes are nearly identical – there’s a consistent eight point (ish) vol elevation in the front (red) to the back (yellow).

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 how quickly the stock price has risen off of Goldy’s upgrade. The IV30™ has risen dramatically as well.

Let’s look to the Options Tab.

There are interesting trades to analyze wrt diagonals and straight calendars. An interesting question to roll around on your tongue is whether or not the Goldy upgrade after the recent stock move makes this company more or less likely (or unchanged) to move around a lot from here.

This is trade analysis, not a recommendation.

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