Thursday, October 6, 2011

Comtech Telecomm (CMTL) - Vol Explodes 50%, Options Trade 45x Average Volume

CMTL is trading $31.08, up 10.2% with IV30™ exploding up 49.5%. The LIVEVOL® Pro Summary is below.


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Comtech Telecommunications Corp. (Comtech) designs, develops and markets products, systems and services for communications solutions. The Company operates in three segments: telecommunications transmission, mobile data communications and radio frequency (RF) microwave amplifiers.

The news pushing the stock and vol is summarized below from a Bloomberg article:

Comtech Telecommunications Corp. (CMTL) rallied 7.5 percent to $30.32 after jumping 7.8 percent, the most intraday since Jan. 26. The communications equipment maker is attracting potential takeover interest from several government contractors, according a report by Reuters, which cited people familiar with the situation.
Bloomberg: Comtech, Constellation Brands, Express Scripts, Yahoo: U.S. Equity Movers, written by Lu Wang.

The vol pop is astounding.  As the options for this firm have been priced as low as 25.89 in IV30™. The company has traded 21,726 contracts on total daily average option volume of just 473, or 45x the daily average. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates the action. The Oct 27.5 puts are the most active line trading more than 4,000x on OI of 4,125, then the Nov 30 calls, trading more than 3,800x on OI of just 1,346. The puts might be closing given the trade size to OI. The largest orders in the calls look like purchases to me on a small relative OI.

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

The front is elevated to the back, but most noticeably, check out that vol diff in the upside calls -- that's ~13 vol points, or said differently, the Oct upside is about 26% more expensive than the Nov (in terms of vol).

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).

The data points today are the story -- vol exploded on this news as the stock popped about 10%.

Possible Trades to Analyze
While the Oct/Nov 30 or 32.5 c/s or diagonal c/s seems sorta... obvious, I would note that the stock has popped on what may turn out to be totally unfounded rumors and that back month upside vega, even at a discount to Oct, could get smacked. Then again... Selling Oct at 70% (in dollars) of Nov for options that expire in six trading days [CORRECTION: Eleven Trading Days] while owning a full month might seem tasty.

This is trade analysis, not a recommendation.

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  1. You wrote at the end Then again... Selling Oct at 70% (in dollars) of Nov for options that expire in six trading days while owning a full month might seem tasty. Isn't expiration in 11 trading days?

  2. Yes it is! My mistake.