Tuesday, October 11, 2011

Seabridge Gold (SA) - Elevated Vol, Rising Stock, Parabolic Skew

SA is trading $23.41, up 6.7% with IV30™ up 5.3%. The LIVEVOL® Pro Summary is below.


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Seabridge Gold Inc. (Seabridge) is engaged in acquiring, exploring and developing gold deposits.

This is both an order flow note and a note on some elevated vol. The company has traded 10,931 contracts on total daily average option volume of just 1,035. Calls have traded on a 10.2:1 ratio to puts with the action in the Nov 23 calls where over 8,000 have traded. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the Nov 23 calls are mostly opening (compare OI to trade size). When looking down the entire option chain for SA, I don't see any OI larger than 2,500, so this action is very large.

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

The skew is sort of spiky, that's do mostly to the width of the markets so it's not really a trading opportunity. We can see that Oct vol is priced a couple of points higher than Nov and both months show a parabolic skew. The 52 wk range for SA stock is [$19.84, $36.22].

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).

We can see that the 52 wk low in stock price was hit recently -- 10-4-2011. On the vol side, we can see that as the stock price has risen, the IV30™ has as well (recently). The vol popped on a down gap
in late Sep but it has remained elevated since. As the stock has found a "quiet" period, a vol diff has opened between the implied and the realized historical vols. Hmmm...

Possible Trades to Analyze
The upside is showing the action today, with the vol up it feels like purchases. For vol sellers, decent prices are likely had on that Nov 23 line. Alternatively, moving further OTM, that parabolic skew is pretty juicy, which could mean examining OTM vol sales or ATM vol purchases against OTM vol sales (perhaps on a ratio?). Or not...

This is trade analysis, not a recommendation.

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1 comment:

  1. I cannot believe that the price of gold recently was almost 2000 dollars an ounce.