Monday, October 10, 2011

OmniVision Tech (OVTI) - Vol Diff Opens to Calendar

OVTI is trading $16.42, up 3.5% with IV30™ down 3.9%. The LIVEVOL® Pro Summary is below.


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OmniVision Technologies, Inc. (OmniVision), incorporated in May 1995, designs, develops and markets semiconductor image-sensor devices.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.

The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. 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 front month vol simply because earnings are approaching.

Let's start with the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

Two things that I noted:
1. The stock gapped down on the last earnings.
2. The IV30™ at ~88 looks pretty fair to the short-term and long-term historical vols. Specifically:

IV30™: 87.96
HV20: 101.42
HV180: 83.99

A vol sale over 105 or a purchase below 80 start to become interesting even without a calendar spread.

Looking to the Skew Tab (below), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).

We can see how the front month is elevated to the back. It's also interesting to see the upside is bid in Oct to both the ATM and downside leaving an even larger vol diff to the upside between Oct and Nov... Hmmm...

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

Potential Trades to Analyze
OVTI stock has a 52 wk range of [$12.60, $37.05]

1. Calendar spread mania
Upside, downside, diagonal and ATM are all worth exmaining in this stock, with vol diffs as high as 25 vol points opening up between the front two months.

This is trade analysis, not a recommendation.

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