Monday, October 10, 2011

Forest Oil (FST) - Earnings Vol on Sale?

FST is trading $10.92, up 7.2% with IV30™ up 6.9%. The LIVEVOL® Pro Summary is below.


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Forest Oil Corporation (Forest) is an independent oil and gas company engaged in the acquisition, exploration, development, and production of oil, natural gas, and natural gas liquids in North America.

This is another calendar spread opportunity to examine, with a twist due to earnings. Let's start with the Skew Tab.

Oct lies well above Nov and the shape of the skews are the same other than the Oct 9 strike which is slightly depressed relative to the strike above it. The twist... The last two earnings cycles for FST at this time of year were 11-2-2009 and 11-1-2010. If we assume something similar this year, then the Nov options have earnings -- a vol event. Hmmm...

The Charts Tab (6 months) is included below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

The stock recently paid out a share distribution, so that HV pop isn't "real." What we can see is that the IV30™ is just over 94 -- the annual high is 97.04.

Finally, let's turn to the Options Tab, below.

Possible Trades to Analyze
Whether it be OTM downside, downside or ATM, or even more involved ratios and diagonals -- owning earnings vol for less than Oct vol seems like a reasonable position to examine.

This is trade analysis, not a recommendation.

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