Monday, August 1, 2011

Commercial Metals (CMC) - Vol Continues to Climb; Sep Bets Grow

CMC is trading $14.16, down 2.4% with IV30™ down 2.5%. The LIVEVOL® Pro Summary is below.


Click for Free Trial


Commercial Metals Company recycles, manufactures, fabricates and distributes steel and metal products and related materials and services through a network of locations throughout the United States and internationally.

I wrote about this company last week. You can read that blog here:
Commercial Metals (CMC) - Order Flow Doubles Down, Calls Accumulated

That one was an order flow note, but I did note how high the vol (IV30™) was. It had spiked to 37.61. As of this writing, the IV30™ is now 19% higher to over 44. The Livevol Pro Summary from 7-26-2011 is included below for completeness.

Today I found CMC using the real-time custom scan that searches 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 CMC 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™: 44.02
HV20: 27.02
HV180: 27.94

So, IV30™ is substantially elevated relative to the short-term and long-term realized movement of the stock. The 52 wk range in IV30™ for CMC is [28.74, 52.18].

Let's turn to the Skew Tab.

We can see the second month vol is the most elevated of the front three. Aug and Dec vol are 42.27 and 41.62, respectively, while Sep vol is priced at 45.01. For both of the front two months the upside skew is bid. Dec skew is rather "normal" looking. The risk in CMC is highest in Sep and it moves into both tails (or that's what the option market reflects, at least).

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

We can see that large OI in the Sep 16 calls which were the focus of the note on 7-26-2011.  We can also see that most of the action today has been in Sep, again. Hmm...

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:

No comments:

Post a Comment