Tuesday, September 20, 2011

Rubicon Technology (RBCN) - Elevated Vol Trend and Offered Puts

RBCN is trading $12.14, down 0.5% with IV30™ at 79.75 as of ~11:30am EST. 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.

The vol in this company is elevated and that’s what caught my attention. I found it on the elevated vol scan.

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).

A couple of things to note here:

1. The stock has fallen from as high as $29.79 on 4-27-2011 to now below teenager status, trading at $12.14. That’s a 59% drop in less than 5 months.

2. The implied vol has traded above the short-term realized vol essentially everyday for the last six months.

As of right now, the IV30™ is trading above both the HV20 and the HV180. Specifically:

IV30™: 79.75
HV20: 68.65
HV180: 57.09

It’s this vol difference that caught my eye. Let’s turn to the Skew Tab to examine the month-to-month and line-by-line vol comps.

We can see that Nov is priced above Oct (in terms of vol). Earnings are due out in early Nov, so the overall vol diff makes sense. Another point of interest, check out the vol in the Oct 10 puts. That depression is based on a $0.35 offer 289x.

Finally, let’s turn to the Options Tab, and make a trade.

I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. But, that elevated IV30™ to historical trend is compelling as is that offer in the Oct 10 puts as a potential cover to a vol sale.

This is trade analysis, not a recommendation.

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