Wednesday, December 14, 2011

Honeywell (HON) - Depressed Implied, Elevated Dec

HON is trading $51.79, down 1.0% with IV30™ up 2.3%. The LIVEVOL® Pro Summary is below.

UPDATE: I believe HON has an earnings guidance call 12-15-2011 at 9am EST.


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Honeywell International Inc. (Honeywell) is a diversified technology and manufacturing company, serving customers worldwide with aerospace products and services, control, sensing and security technologies for buildings, homes and industry, turbochargers, automotive products, specialty chemicals, electronic and advanced materials, process technology for refining and petrochemicals, and energy efficient products and solutions for homes, business and transportation.

This is another vol note with an interesting twist. 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).

The vol chart shows that the implied is slightly depressed to both the short-term and long-term historical realized vol. Specifically:

IV30™: 33.93
HV20: 34.89
HV180: 36.44

So, while the implied is depressed, all-in-all, it seems that ~35 vol is fair to HON as of this writing. Let’s take a look at the Skew Tab, below.

We can see than Jan and Mar expiries show similar vol levels while the Dec options, expiring in two and a half trading days, are quite elevated to the back months. Keeping in mind that 35 vol is ~fair, the Dec ATM options are priced at 60 vol and the downside priced to over 65 vol.

Finally, let’s turn to the Options Tab.

I wrote about this one for (OptionsProfits), so no specific trade analysis here. I will say that the vol diff between Jan and Dec is interesting given that the vega in Jan is fair (ish) in and of itself while the gamma in Dec is rather elevated (in comparison).

This is trade analysis, not a recommendation.

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