Friday, August 19, 2011

Rubicon Technology (RBCN) - Elevated Vol That Doesn't Mirror the Market Pattern

RBCN is trading $12.43, down 2.9% with IV30™ up 3.9%. 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 found this stock using a real-time custom scan. This one hunts for high vols relative to the short-term and long-term hisorical realized vol. In this market, that's actually a unique set of phenomena.

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™: 97.38
HV20: 72.56
HV180: 53.47

To put the broader market in some perspective, I've included the same vol chart for SPY, below.

The vast majority of stocks I've looked at have this type of vol chart -- where the implied is substantially elevated to the recent past, but still also substantially depressed to the short-term realized. In English, most stocks I see have moved more than the implied has... well... implied...

Let's turn to the Skew Tab for the line-by-line and month-to-month vols.

We can see a pretty normal (ish) looking skew where the front is elevated to the back given the recent market action and the shape is bid to the OTM puts and decreasing from there to the higher strikes.

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

Possible Trades to Analyze
1. If looking for some vol to sell, the Sep 12.5 straddle covered with the Sep 11/14 strangle has an interesting payout if prices are good (i.e. if there's any liquidity inside the NBBO).

2. One sided vol sales either naked or with cover also seem reasonable to analyze. Nothing jumps out as obvious by strike, but there is some juicy juice, here. Then again, most other stocks have shown that the juicy juice has been too low... so...

And yeah, I called it juicy juice... It's Friday, cut me some slack... :-p

This is trade analysis, not a recommendation.

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