Tuesday, May 17, 2011

Overseas Shipping (OSG) - Elevated Vol

OSG is trading $28.60, down 1.0% with IV30™ up 4.4%. The LIVEVOL® Pro Summary is below.


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Overseas Shipholding Group, Inc. (OSG) is a bulk shipping company engaged in the ocean transportation of crude oil and petroleum products.

I found this stock using a real-time custom scan. This one hunts for high vols.

Custom Scan Details
Stock Price >= $7 and <= $70
IV30™ - HV20™ >= 10
HV180™ - IV30™ <= -8
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >=10 and <=60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated 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 selling elevated IV30™ simply because earnings are approaching.

The OSG 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™: 40.22
HV20: 30.68
HV180: 32.26

So, IV30™ is elevated relative to the short-term and long-term realized movement of the stock. Let's look to the skew tab to see month-by-month and line-by-line vol shape.

While the vol is elevated relative to historical, the months lie almost on top of each other. In English, the month-to-month vols are at the same level and show the same vol shape.

Let's look to the Options Tab (below).

Note the monthly vols -- 41.98, 40.22, 40.43 respectively.

Possible Trades to Analyze
1. Selling ATM vol:
Sell the Jun 29 straddle or Jun 28/30 strangle @ ~40 vol. Cover with wings. Ratios might be interesting here as well.

This is trade analysis, not a recommendation.

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