Monday, June 27, 2011

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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