Monday, November 28, 2011

Sina Corp (SINA) - Elevated Vol, Elevated Downside Skew, Dropping Stock and Rumors

SINA is trading $59.16, down 6.3% with IV30™ up 15.6%. The LIVEVOL® Pro Summary is below.


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SINA Corporation (SINA) is an online media company and MVAS provider in the People’s Republic of China (PRC) and the global Chinese communities.

This is a vol note on a stock down substantially (to a new annual low) with popping vol, while the market rallies hard and VIX is down over 6%. There was some news that a newsletter would come out with some negative "stuff" on SINA. The stock has come off of its lows when a report that JPM would defend the stock if a letter came out was published. Shortly thereafter, another rumor came out that there was no such newsletter article in the makings. K?...

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

SINA stock was higher than $120 just a few months ago and hit as low as $56.05, today. The 52 wk low was $61.20. On the vol side we can see the IV30™ is spiking right now.  On 11-16-2011 the IV30™ closed at 69.31. As of this writing the vol has risen to 95.49 or up 37% in twelve calendar days.

Along with the vol spike, a calendar diff has opened up between the front three expirations (including the weeklies). Let's turn to the Skew Tab, below.

We can see a substantial vol diff has opened between the downsides for each of the three expos. The next earnings cycle is likely due out in Mar -- so this is not earnings related.

Finally, let's turn to the Options Tab for completeness.

Possible Trades to Analyze
The Dec 40 put action today looks like sales on small existing OI. A 3,881 lot went up on PHLX @ $0.50 with a $0.50 x $0.80 market. Those puts are now $0.70 bid... ouch... but maybe temporarily...

Chinese stocks in general have a tendency (or a possibility) to gap (down usually) and to spike in vol. They can also halt for several months leaving stock and options holders... ummm... in a not good place?...

With the violent move down in price and rise in vol off of a rumor of an article that never happened -- what would happen if it did happen?... A bet against "it happening" in the next five trading days looks to the weekly options which are pretty juicy. The Dec 45 puts are priced @ 160 vol... whoa... The ATM straddle is priced @ 110 vol -- also a whoa... The 52 wk high in IV30™ is 119.56. Having said that, the stock moved down $7.10 at its low today so a $6.30 five day straddle isn't necessarily "high vol."

This is trade analysis, not a recommendation.

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