Tuesday, August 30, 2011

Barclays (BCS) - Calendar Spread, Stock Bottom and Vol Diff

BCS is trading $10.73, down 1.3% with IV30™ up 2.7%. The LIVEVOL® Pro Summary is below.


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Barclays PLC (Barclays) is a global financial services provider engaged in retail banking, credit cards, corporate and investment banking and wealth management. The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months. Taken together with the stock and vol charts, this is an interesting one to examine.

Custom Scan Details

Stock Price GTE $5

Sigma1 - Sigma2 GTE 8

Average Option Volume GTE 1,000

Industry isNot Bio-tech

Days After Earnings GTE 5 LTE 70

Sigma1, Sigma2 GTE 1

The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. 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 front month vol simply because earnings are approaching.

Let’s start with the Skew Tab.

The shape of the skew for both months is similar – normal in that it’s bid to the downside. The scan is triggered because of the vol diff between Sep and Oct.

Now we can turn to the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™- red vs HV20 - blue vs HV180 - pink).

Starting with the stock portion, we can see the stock drop of late. What caught my attention was the low print in stock, which was $9.53. More on that in a sec…

Turning to the vol side, we can see while the IV30™ has popped significantly, the realized short-term movement of the stock has actually been well above that level. Specifically:

IV30™: 76.61

HV20: 113.24

HV180: 50.30

HV10: 79.35

Interestingly, the IV30™ is now closest to the HV10 (the day trading day realized historical vol).

Finally, let's look to the Options Tab (below).

I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. But taking advantage of the vol diff between the front two months to the downside while also eyeing that $9.53 52 wk. low is an interesting position to examine whether that be in a plain vanilla calendar, or some sort of diagonal spread.

This is trade analysis, not a recommendation.

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