Thursday, December 8, 2011

Citigroup (C) - Vol Rises, Calendar on Ambiguous Earnings Date

C is trading $27.69, down 7.2% with IV30™ up 5.1%. The LIVEVOL® Pro Summary is below.


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Citigroup Inc. (Citigroup) is a global diversified financial services holding company. Citigroup businesses provide consumers, corporations, governments and institutions with a range of financial products and services.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months. There's an added twist here, as C may have earnings in the Jan expiration.

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 look to the Skew Tab (below).

I've included the weekly options expiring tomorrow as well as the Dec and Jan monthlies. We can see a monotonic vol increase as we move from the back to the front. The weeklies show a slightly parabolic skew -- OTM stickiness. It's interesting to note that the last two January earnings reports for C were 1-19-2010 and 1-18-2011. Jan expo Friday is 1-20-2012. Hmmm....

Now we can turn 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 been on an upswing with the rest of the market, and most recently has come off those recent highs (also with the market). The move down today is a bit spooky. On the vol side we can see the implied is popping to the short-term realized historical vol and passed the long-term realized historical. Specifically:

IV30™: 65.28
HV20: 65.86
HV180: 59.02

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

This is trade analysis, not a recommendation.

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