Wednesday, May 18, 2011

NYSE Euronext (NYX) - Low Vol, Purchase, Sale -- Neither?

NYX is trading $35.00, up 1.5% with IV30™ down 1.7% as of ~ 10:30am EST. The LIVEVOL® Pro Summary is below.


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NYSE Euronext is a global operator of financial markets and provider of trading technologies. The NYSE!

Since I've been posting some calendar spread and elevated vol notes, I found this stock using the real-time custom scan that hunts for low vols, for a change of pace. I wrote about this one for

Custom Scan Details
Stock Price >= $7
IV30™ - HV20™ <= -8 >= -40
HV180™ - IV30™ >=7
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >= 32

The goal with this scan is to identify short-term implied vol (IV30™) that is depressed both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). 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 purchasing depressed IV30™ relative to HV20 simply because of a large earnings move.

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

We can see:
IV30™: 28.60
HV20: 52.86
HV180: 35.79

So, IV30™ is depressed relative to the short-term and long-term realized movement of the stock. I’ve highlighted three large stock moves on the recent past – let’s look at each one and add some color:

2-9-2011: NYX closed up $4.69 or 14% at $38.10.
The London Stock Exchange agreed to buy TMX Group, operator of the Toronto Stock Exchange, for $3.2 billion, and the market was abuzz after that. Speculation that Deutsche Borse AG is in talks to buy NYSE Euronext was confirmed, and after being halted for some time trading resumed at higher prices and a dizzying pace.
Source: The Motley Fool

4-1-2011: NYX closed up $4.43 or 12.6% at 39.60.
Instead of fighting the NYSE, Nasdaq wants to own it.
Nasdaq OMX Group Inc. and another U.S.-based market, the IntercontinentalExchange Inc., submitted a joint $11.3 billion bid Friday for NYSE Euronext, the parent company of the New York Stock Exchange. The offer, which was expected, raises the possibility of a bidding war for the NYSE with Deutsche Boerse. NYSE agreed to a $10 billion deal with the German exchange operator in February.
Source: AP

5-13-2011: NYX close down $5.16 or 12.6% at $35.73.
Nasdaq and Intercontinental Exchange on Monday withdrew their joint $11 billion bid for the parent of the New York Stock Exchange after the U.S. Department of Justice informed the companies that it would pursue a lawsuit to block the deal.
Source: AP

Let’s turn to the Skew Tab and look at month-to-month and line-by-line vols.

We can see the option market reflects upside risk in Jun (OTM calls are bid). But, don’t let the picture fool you, the vol increases are subtle – about one vol point per line from 39-41.

So there you have it. Lots of news, lots of volatility, upside skew is bid. The IV30™ is depressed relative to the short-term and long-term historical vol, so the ATM vol is "cheaper" than historical and the upside skew is more expensive than the ATM.

But, the news of NASDAQ stepping away since the DOJ sounds like they will simply not allow an NYSE/NASDAQ merger. The HV is "artificially" elevated due to the stock drop of late. In fact, before that news of NASDAQ stepping away, HV20 reached as low as 16.20 on 5-10-2011.

The upside skew in Jun looks expensive, but in reality, it's just a couple of vol points. All in all, I don't see any trades here to examine.

I’ve included the Options Tab (below) for those that feel differently. It’s certainly possible that NYX moves abruptly again.

This is trade analysis, not a recommendation.

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