Monday, November 7, 2011

Stanley Black & Decker (SWK) - Popping Low Vol?

SWK is trading $65.26, down 2.3% with IV30™ up 7.6%. The LIVEVOL® Pro Summary is below.


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Stanley Black & Decker, Inc. operates in three segments: Construction & Do-It-Yourself (CDIY), Security, and Industrial.

I found this stock because the vol is popping yet, it may be "cheap" vol still. Let's look to the Charts Tab, (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

The stock has had an interesting six months, going from ~$75 down to ~$50, and since early October it's now back up to over $65. At the same time the IV30™ has actually gone over 60 and now has fallen to ~40. As of right now the implied is just now crossing the long-term realized historical vol and is still substantially below the short-term realized vol. Specifically:

IV30™: 41.28
HV20: 51.44
HV180: 40.62

Let's look to the Skew Tab snap (below) to examine the vols by strike by month.

This is a cool skew as the three months sit on top of each other for the ATM strikes, but the downside is more expensive (in terms of vol) in the front monotonically increasing from back to front. We can see the opposite phenomenon looking at the upside -- the back is more expensive than the front.

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

Possible Trades to Analyze
I note the ATM straddle in Nov -- it's worth ~$3.75 while the stock has moved $1.50 today. On the downside, the Nov/Dec 52.5 put calendar sells ~17 vol points higher than it purchases if $0.15 can be had in those Nov puts. A ratio, diagonal (either way) or both might be worth examining, especially against a vol purchase in the ATM options. Tricky...

One additional note:  The HV20 is now also dipping of late, falling from over 68 to now just over 50.  In English, the realized vol of the underlying has been dipping.

This is trade analysis, not a recommendation.

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