Friday, July 15, 2011

Range Resources (RRC) - Stock and Vol Pop on Takeover Reflection

RRC is trading $60.53, up 9.9% with IV30™ up 5.4%. The LIVEVOL® Pro Summary is below.


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Range Resources Corporation is an independent natural gas and oil company. The Company is engaged in the exploration, development and acquisition of primarily natural gas and oil properties, mostly in the Appalachian and Southwestern regions of the United States.

This is an order flow note -- sort of a bullish reflection off the cash deal for HK this morning. Here's a quick news snippet:

Looking toward a possible pick up in deal activity, Lear said possible acquisition targets could include Range Resources RRC, Brigham Exploration Co. BEXP and Kodiak Oil & Gas Corp. KOG.
Source: MarketWatch: Range Resources, Brigham, Kodiak seen as acquisition targets after Petrohawk deal, written by Steve Gelsi.

The company has traded over 7,000 contracts on total daily average option volume of just 2,350. Calls have traded on a 6:1 ratio to puts as the stock and vol spike. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates the action. The Aug 62.5 calls are the moat active in the front two months with just under 1,000 traded thus far on existing OI of just 79. There aren't any large trades -- sort of feels retail order flow-'ee', and mostly purchases... I think...

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

While the vol has popped with stock, the skew remains normal looking -- that is, the downside vol is bid to the upside and there isn't any real skew shape difference between the Aug and Sep options.

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).

We can see the stock pop today after what was looking like a re-tracement (down). The 52 wk range for RRC is [$32.13, $59.59] -- so, obviously it's crossed into a new annual high.

On the vol side, we can see the IV30™ has spiked above the HV180 and HV20. One big caveat, the HV20 updates after the close (so on Monday). The current HV20 is based on yesterday's close, not today's move. The 52 wk range in IV30™ for RRC is [30.92, 46.53]. Given the uncertainty and relatively abrupt move today, the vol doesn't feel expensive here -- though I suppose we could make an argument that it doesn't feel cheap either... How helpful was that?...

Happy Friday!

This is trade analysis, not a recommendation.

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