Thursday, June 30, 2011

ZAGG - Elevated Vol in Front Above Earnings Vol in Back

ZAGG is trading $13.07, down 4.9% with IV30™ up 6.3% as of ~10:55am EST. The LIVEVOL® Pro Summary is below.



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ZAGG Incorporated (ZAGG) designs, manufactures and distributes protective coverings, audio accessories and power solutions for consumer electronic and hand-held devices under the brand names invisibleSHIELD, ZAGGaudio, and ZAGGskins.

ZAGG came up on a few custom scans, but I’m focusing on the elevated implied vol relative to historical vol. Let’s look at the custom scan details:

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20 LTE 10
HV180 - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 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 ZAGG 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 the stock has risen of late, from around $6 in late March to over $15 less than three months later. On the vol side, IV30™ is elevated to both the HV20 and HV180. Specifically:

IV30™: 110.92
HV20: 80.31
HV180: 89.49

Two things to note – the implied is obviously substantially elevated to the historicals but also note how high the realized vol is. This stock can really move. Let’s turn to the Skew Tab.



This is another of the custom scans that ZAGG appears on – the front two month calendar spread. While Jul vol is priced at around 126, Aug is priced at 104. I believe earnings are due out in early Aug, or at least, after Jul expo. I tried calling IR, but got the voicemail. The last earnings cycle for ZAGG was 5-10-2011, so it feels like a reasonable bet that earnings are in fact after Jul 16th (Jul expo.).

Let’s turn to the Options Tab for completeness.



That vol diff between Jul and Aug is a bit odd. I wrote about this one for TheStreet.com (OptionsProfits) so no specific trade analysis here.

This is trade analysis, not a recommendation.

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Wednesday, June 29, 2011

I Traded an Arb, Today -- Did You?

The ELMG summary is included below.



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I traded an arb today, did you? If you didn't, I can show you the tool I used -- and better yet, you can have it too.

We did two trades today. Let's start simple, and then get more complex.

1. Check out the executed trades from LVP in stock ELMG:



You'll see the two lot:
Sell Sep 25 calls @ $8.00
Buy Sep 30 calls for $3.00

Yup, that's selling a $5 call spread @ $5.00. Max Gain is $5.00, MaxLoss is $0 (and commissions).

2. Getting it even better and bigger:
You'll see a thirteen lot:
Sell Sep 25 calls @ $8.00
Buy Dec 30 puts for $0.05

What you don't see is the purchase of 1,300 shares for 32.94. That makes the puts a synthetic call -- specifically, paying $2.99 for the Dec 30 calls.

So the trade becomes:

Sell Sep 25 calls @ $8.00
Buy Dec 30 calls for $2.99

So this not only sells a $5 call spread @ $5.01, but it also owns the Dec options against a Sep sale. Now that's sweet... The Livevol™ Pro Options Tab is included below.



For those of you wondering what this stock is -- it's a takeover for $33 by HON. So, in this example we're dealing with a very low probability that something actually happens to take the stock below $30 -- but it was a free bet.

How Did We Find It?
Livevol® has an advanced Market Scanner called the Livevol® Report Builder (LVRB). One of the scans we've created searches for Vertical spreads (credits and debits) for an arb (so $0.00 or less for debits or GT strike diff for credits). Here's a snapshot of what my dashboard looks like:



It's blank b/c I am hiding the results (boo!). The point is, we have multiple scans open, refreshing at whatever interval we choose, showing us results that satisfy our strategies. Other arbs we hunt for are time spreads for even (or less) and butterflies for even (or less).

Of course, the true power of the LVRB isn't the rare arb, but rather more sophisticated strategies involving vol, deltas, calcs, reversals, conversions, boxes and anything else you fancy. Real-time access to the entire optionable market, strike-by-strike, with access to Livevol® calcs, vols, historical, earnings, dividends and fundamental data.

To read about LVRB, please go here:
LVRB Info

To get a trial to LVRB, please e-mail support "at" livevol.com. The cost is $500 for a one-month trial.

This is trade analysis, not a recommendation.

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eBay (EBAY) - Elevated Vol; Near-term Risk Above Earnings Risk

EBAY is trading $29.28, up 1.1% with IV30™ down 6.6%. The LIVEVOL® Pro Summary is below.



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eBay Inc. (eBay) bring together buyers and sellers every day on a local, national and international basis through a range of Websites. I noticed EBAY yesterday -- vol is elevated and was popping again. Today it's cooled off a bit, but the vol still has created an interesting phenomenon -- the front month is above the back, even though the back has earnings. Hmmm...

Options in general have been very active in EBAY, so something is afoot. But let's look to the vol charts rather than the order flow, for now.

The Skew Tab snap (below) illustrates the vols by strike by month.



So we can see that the Jul options are priced at higher vol than Aug. Again, I see a projection for the next earnings cycle as 7-20-11, with the Jul cycle expiring the Friday/Saturday before (7-16-2011).

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).



The key here is the vol portion. We can see:

IV30™: 45.13
HV20: 31.30
HV180: 29.25

More specifically:
Jul vol: 48.01
Aug vol: 43.67

So, again, we have the option markets reflecting risk in Jul greater than the known vol event in Aug (earnings). Let's turn to the Options Tab (below).



Notice how large the OI in the front month is. The average OI over the last 60 trading days in EBAY has been 470,332 (overall). Right now, the OI is 733,429 (overall). Positions building, vol elevated, and the only news I see is this:

"eBay to eliminate a supermajority voting requirement in its bylaws"
Provided by Briefing.com (www.briefing.com).

Something tells me, there's more to this vol than that...

This is trade analysis, not a recommendation.

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Bridgepoint (BPI) - Elevated Vol, Or is it?...

BPI is trading $24.00, up small with IV30™ down 5.3%. The LIVEVOL® Pro Summary is below.



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Bridgepoint Education, Inc. (Bridgepoint) is a accredited provider of postsecondary education services. This has been an interesting industry to follow as demand seems to be increasing while the regulatory framework is in flux.

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

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20 LTE 10
HV180 - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 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 BPI 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™: 57.96
HV20: 42.52
HV180: 47.20

So, IV30™ is elevated relative to the short-term and long-term realized movement of the stock. Let’s turn to the Skew Tab to search for any line-by-line discrepancies that we can turn into a trade.



The skew is actually quite pretty – no kinks. The front is depressed to the back b/c BPI has an earnings release in the Aug cycle, so that's "normal."

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



As we saw in the skew chart, there aren’t any obvious vol sales (or purchases) in the chain in terms line-by-line scalps. I wrote about this one for TheStreet.com (OptionsProfits) so no specific trade analysis here but, while the implied is elevated to the historical realized, at the beginning of Jun, IV30™ was as high as 74.46. So this isn't an automatic do.

This is trade analysis, not a recommendation.

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Tuesday, June 28, 2011

Rubicon Technology (RBCN) - Elevated Vol on a New Teenager

RBCN is trading $16.76, up 1.0% with IV30™ down 3.0%. The LIVEVOL® Pro Summary is below.



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Rubicon Technology, Inc. (Rubicon) is an electronic materials provider, which develops, manufactures and sells monocrystalline sapphire and other crystalline products for light-emitting diodes (LEDs), radio frequency integrated circuits (RFICs), blue laser diodes, optoelectronics and other optical applications.

I wrote about RBCN on 6-9-2011 when it was a $21.98 stock -- now it's a teenager. You can read that post here: Rubicon Technology (RBCN) - Calendar Spread and a Cool Name

I found RBCN today using a real-time custom scan that hunts for elevated vol.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20 LTE 10
HV180 - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 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 RBCN 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™: 63.20
HV20: 52.80
HV180: 53.09

So, IV30™ is elevated relative to the short-term and long-term realized movement of the stock. It is interesting to note that the stock's sharp drop has pushed the HV20 from ~41 to now nearly 53. Also, HV10 is nearly 61.

Let's turn to the Skew Tab.



It's an odd skew in that not only does it flatten near the money then spike back up to the OTM calls, but that it has the same shape for both front two months. The Aug 22 calls are $0.15 x $.060 -- so we're not talkin' about nickel options here.

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



Possible Trades to Analyze

1. Sell the ATM strangle:
a. A sale of the Jul 16/17 strangle and then a cover with the 15/18 strangle receives ~$0.25 and risks $0.75.

b. A more risky version of trade (a) is to sell the short strangle twice and buy the long strangle once. This collects more premium (duh) and therefore sells more vega -- but, it is naked upside and downside risk.

c. A third alternative is to do (b) but only sell the downside twice and avoid the risk of a takeover and RBCN going to $30 (or whatever).

This is trade analysis, not a recommendation.

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Pandora Media (P) - Stock Stability and Elevated Vol

P is trading $17.40, up 5.3% with IV30™ up 1.6% as of ~10:45am EST. The Livevol® Pro Summary is included below.



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Pandora Media, Inc. (Pandora) is an Internet radio in the United States. As of January 31, 2011, it had over 80 million registered users. The stock IPO’d 6-15-2011 with an initial offering price of $16.00. Since then its range has been [$12.16, $26.00]. That high price was achieved on the opening day, since then the high price was actually hit today, in the $17.65 range. The Stock price chart is included, below.



It’s difficult to complete any real analysis on the implied vol and the historical vol as there’s so little history, but, we can compare implied vols of each month to each other. Let’s turn to the Skew Tab.



We can see the front month is elevated to the back – more than a 9 vol point difference. In particular, the vol diff between the 15 strikes is nearly 11 vol points.

I wrote about this one for TheStreet.com (OptionsProfits) so no specific trade analysis here, but the stability of the equity price since the low was reached is compelling as is the vol difference between the front two months.

The Livevol® Pro Options Tab is included below, for completeness.



This is trade analysis, not a recommendation.

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Monday, June 27, 2011

Nike (NKE) - Quick Earnings Preview

NKE is trading $82.25, up 1.3% with IV30™ up 2.3%. The LIVEVOL® Pro Summary is below.



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NIKE, Inc. (NIKE) is engaged in design, development and marketing of footwear, apparel, equipment and accessory products.

This is a fast earnings note as NKE reports AMC, today. I noticed that the last two cycles the stock moved pretty large:

3-17-2011: $85.41 to $77.59
12-21-2010: $92.30 to $86.95

Let's look to the Options Tab below.



We can see the front month straddle is priced at ~$5.64, or ~38 vol. Let's look to the Skew Tab, below.



It's a beautifully "normal" looking skew -- with the front obviously elevated to the back b/c of earnings.

Finally, 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).



I've highlighted the rising vol of late -- even before earnings; it's been an interesting rise as the realized vol has moved (increased) as well. We can also see the gap down on the last earnings on the stock side. Given the market volatility of late, it'll be interesting to see if NKE moves more than the straddle by expo (or even by tomorrow).

This is trade analysis, not a recommendation.

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EXCO Resources (XCO) - Deal In Question; Vol Pops, Stock Drops

XCO is trading $17.21, down 8.4% with IV30™ up 18.6%. The LIVEVOL® Pro Summary is below.



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EXCO Resources, Inc.(EXCO) is an independent oil and natural gas company engaged in the exploration, exploitation, development and production of onshore North American oil and natural gas properties.

On 11-1-2010 the news was this:
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Douglas H Miller, the chairman and CEO of ExCO Resources Inc (XCO) announced an offer to buy XCO stock for $20.50 per share. The deal is valued at $4.36 billion. XCO opened 35% higher than the pre-announcement closing price.
---

Here's the news today from AP that's driving the stock and vol:
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NEW YORK (AP) -- Shares of Exco Resources Inc. dropped more than 8 percent on Monday after media reports said CEO Douglas Miller was mulling taking a portion of the oil and gas company private because he was having a hard time coming up with the financing for the $4 billion-plus deal he proposed involving the whole company.

Miller made the offer in November and Exco said two months later that it was considering options including a possible sale.

Media reports Friday said Miller was being squeezed to give Exco's board a final offer and is now considering letting part of the company remain public so he doesn't have to raise as much money.

At the time of his $20.50 per share offer, Miller told Exco's board he planned to use a "significant portion" of his 3 percent stake to raise money. Miller also said he expected contributions from senior management and outside investors, and he planned to borrow.
Source: Exco falls on reports CEO mulling shrinking deal
---

I found this stock using a custom scan I built searching for names where IV30™ is up at least 10% on the day. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.



The XCO 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).



IV30™: 45.39
HV20: 29.67
HV180: 36.38

So the short-term implied is elevated to the short-term and long-term realized vols.

I've highlighted the stock gap down and the vol pop that goes with it. The price right now is the lowest it's been since before the takeover was announced.

The Skew Tab snap (below) illustrates the vols by strike by month.



We can see how the front month has a parabolic shape -- bid up to the OTM calls. The vol diff opens on the 20 strike, though the Jul 20 calls are just nickel bid. Similarly, the Aug 21 calls are nickel bid.

Finally, let's look to the Options Tab.



Possible Trades to Analyze
This really comes down to expectations on the follow through (or lack thereof) of this takeover bid. Considering that XCO was a $14.83 stock and popped to as high as $20.37 on the takeover news, 45 vol isn't necessarily "too" high.

1. Cheap bet to the upside in Jul:
The Jul 19/20 call spread sells ~4 vol points higher than it purchases, which is a nice trick in a call spread in the same month.

2. Calendar Spread:
The Jul/Aug 20 call spread sells ~45 vol and purchases ~33 vol.

3. Buy the vol:
Maybe the vol is too cheap and the rocky future pushes stock around in Jul. The ATM Jul straddle costs ~$1.50 and the stock has moved $1.57 today, alone.

This is trade analysis, not a recommendation.

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USEC (USU) - Elevated Vol, Vol Event, Calendar Spreads

USU is trading $3.05, down small with IV30™ down 2.1%. The LIVEVOL® Pro Summary is below.



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USEC Inc. (USEC), a global energy company, is a supplier of low enriched uranium (LEU) for commercial nuclear power plants. I found this company on three scans: elevated vol (custom scan), calendar spreads between months one and two (custom scan) and high option volume (relative to average).

The company has traded 15,829 contracts on total daily average option volume of just 2,605. Calls have traded on a 40.4:1 ratio to puts. The action is in the Oct 4 and Oct 5 calls trading 7,025 and 6,313 times, respectively. The largest trade was a 6,300 Oct 4/5 call spread sold @ $0.11 on AMEX. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the Oct 4 calls are mostly opening (compare OI to trade size), while the Oct 5 calls are ambiguous. From what I can tell - the existing interest in Oct 5 calls was short, today those calls were purchased (so OI should go down tomorrow).



The Skew Tab snap (below) illustrates the vols by strike by month.



While the order flow today has been in Oct, it's the front months that look most interesting to me. We can see the elevated front month to the back. The next earnings cycle is actually likely in Aug expiration (the yellow curve) so the elevated vol in Jul reflects elevated risk in the near-term.

Finally, 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).



The stock has been falling, down more than 50% since Jan. On the vol side, the IV30™ is priced ~100 vol points higher than the HV20 and HV180. Said differently, IV30™ is more than 300% of HV180.

Possible Trades to Analyze
The order flow isn't that interesting to me, but the vol diff is. There's some event due out in Jul, I'm guessing - thus the elevated vol.

1. ATM Calendar spread
The Jul/Aug ATM straddle calendar spread sells ~190 vol and purchases ~130 vol, paying ~$0.25 to own the Aug earnings cycle vs the risk (vol event) in Jul.

2. ATM calendar put spread
Depending on liquidity, the Jul/Aug 3 put spread could be done for $0.05.

This is trade analysis, not a recommendation.

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Friday, June 24, 2011

Deutsche Bank (DB) - The Euro, Why it Exists, Why it Can't Go Away and Who's Responsible

DB is trading $55.98, down 3.3% with IV30® popping 15.6%. The LIVEVOL® Pro Summary is below.



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Deutsche Bank AG is a global investment bank. The Company offers a variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world.

I found this stock using a real-time custom scan. This one hunts for high vols. The story is all about Europe and the Eurozone. Here's a snippet from a Reuters report, today:

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Shares of European banks traded in the United States slumped on Friday as investors continued to fret over Greece's debt situation and new concerns about Italy added to the uncertainty.

Italian banks dropped on concerns about their capital positions and after a Moody's downgrade threat on the group.

Greece remained in view as the country's government faced an electorate vehemently opposed to austerity measures that must be passed in parliament next week to avert default, but progress is being made in persuading banks to take part in a second bailout.
Source: Reuters
---

I wrote about the EU and its various debt issues on 5-18-2010. Yeah, 2010. Oddly enough, when I re-read it, it's as though I wrote it today... Which means there hasn't been a lot of remedial action taken in the eyes of the market. Here's that summary -- a blurringly fast review of what's happening in Europe.

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The Treaty of Maastricht (formally, the Treaty on European Union) was signed on February 7th, 1992 by the members of the European Community in Maastricht, the Netherlands. Amongst other things, it created the rules (requirements) for joining the European Union (i.e. the EuroZone).

By amalgamating these currencies, countries like Spain, Portugal, Italy and Greece, which were traditionally agricultural economies, are now able to borrow money with the same terms as the highly efficient and industrialized economies (i.e. Germany).

The requirements to enter the EU were focused around debt, inflation and trade. Greece did not meet the requirements, but never fear, Goldman Sachs to the rescue. In a billion Euro swap using the Japanese Yen, Greece was able to "move" (read: hide) debt off the books and allow it to conform to Euro requirements. In fairness to Goldman, Greece and the EU were highly motivated to make this happen, so while Goldman were the actual "arrangers", this thing was gonna happen almost no matter what (that's just my opinion).

Of course, no matter how you "arrange," reality strikes back. It's really no surprise to the open eyed that Greece is now in a huge amount of trouble. I understand that at one point they had worse debt ratios than Argentina and Russia when those countries defaulted (please verify this on your own).

For all you who think Greece is going to get "kicked-out" of the EU; in the words of the magic 8 ball, "Signs point to no." The extrication of a country is almost impossible, and the implication for the future is an even greater deterrent.

Keep in mind that Germany's geo-political clout stems from the EU existing and growing, without it, they're just Germany, with it, they are Europe (is there any precedence to worry about that?... hmmm). The growing risk now is that Spain, Italy, Portugal, Romania, Hungary and a whole bunch more Eastern European countries are on the verge of similar calamities. FYI, some would consider my use of the word "risk" a vast under statement.

Ok, quick and dirty lesson over, onto trading and options markets.
---

Let's get to DB and the custom scan.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20 LTE 10
HV180 - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 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 DB 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™: 43.11
HV20: 32.07
HV180: 29.76

So, IV30™ is elevated relative to the short-term and long-term realized movement of the stock, and the move today has widened that gap substantially.

Let's turn to the Skew Tab.



The shape of the skew is normal in that it's downward sloping across the three front months, while only Aug (yellow) shows a slight kink. In other words, the vol is elevated across all strikes and no specific strikes seem out of whack based on order flow.

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



Note the vol in the Jul 47.5 puts -- 53.18 on a stock with HV180 of 29.76.

Possible Trades to Analyze
This really depends on your view. Is Europe gonna get better? Get worse? Stay here? Tough to buy this vol, but then again, does 43 vol in DB really reflect the risk of the entire Eurozone collapsing?

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
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