Thursday, November 3, 2011

Mechel (MTL) - Downside Vol Diff and Depressed Vol, Moving Stock

MTL is trading $12.53, down 0.7% with IV30™ down 1.9% as of ~11:10am EST. The LIVEVOL® Pro Summary is below.


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Mechel OAO is a Russia-based integrated mining and steel company. The Company focuses on the production of mining products, such as coal, iron ore, nickel, and steel products.

I found this company because the of the vol difference that has opened up between the front two months in the downside puts. Let’s turn to the Skew Tab, below.

While the skew has a normal shape across both months, the downside strikes show as much as a 13 vol point spread. The 52 wk range for MTL underlying is [$8.35, $34.46], which is a substantially wide range.

Let’s turn to the Charts Tab, below (six months). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

We can see in just this six month chart how far the stock has fallen. But, the phenomenon that caught my eye is the relative vol chart. Check out how depressed IV30™ is to the short-term historical measure (HV20). Specifically:

IV30™: 66.20
HV20: 102.99
HV180: 61.66

So relative to the long-term measure, the IV30™ is priced pretty fairly, but again, to that recent stock movement, it’s quite low. Let’s turn to the Options Tab for completeness.

I wrote about this one for (OptionsProfits), so no specific trade analysis here. But, the Nov/Dec 12 put spread has that vol diff that caught me eye. That trade is priced $0.20 x $0.50. The problem is, while it purchases ~63 vol, it only sells ~75 vol. With HV20 over 100, it's a legitimate question to ask whether selling the gamma for that vol level is "worth it." I’d wouldn't mind seeing that vol purchase for less than the HV180 (less than 61) if the vol sale is that the 75 level.

This is trade analysis, not a recommendation.

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