Friday, December 9, 2011

MBIA (MBI) - Vol Remains Elevated After 50% Gain

MBI is trading $11.26, up 3.3% with IV30™ down 1.3%. The LIVEVOL® Pro Summary is below.


Click for Free Trial


MBIA Inc. (MBIA) together with its subsidiaries, operates the financial guarantee insurance business. MBIA is a provider of asset management and other advisory services. The activities are managed through three business segments: United States public finance insurance, structured finance and international insurance, and advisory services.

This is another vol note -- this time on a stock that has been ripping to the upside. 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 recent stock climb has been substantial. On 11-25-2011 the company closed at $7.42. Fourteen days later it's $11.26 or a 52% rise. On the vol side we can see the implied almost always has traded above the historical measures over the last six months. Interestingly, with the stock rise, the implied has remained elevated, but still relatively flat from that elevated level. In English, as the realized vol has popped with the stock rise, the implied has stood still.

Let's look at some of the news surrounding MBI over the last couple of weeks.

1. Source: Provided by Briefing (11/23/2011)

MBI calls are seeing interest with strength in the underlying stock (+4%) following reports that peer PMI filed for bankruptcy.

2. Source: Reuters (11/30/2011)

(Reuters) - Shares in bond insurer MBIA Inc (MBI.N) spiked in late trading on Wednesday after Standard & Poor's affirmed the investment-grade rating of a subsidiary that insures municipal bonds, ending months of uncertainty.

So there you go. A competitor bites the dust (ish) and S&P reaffirms the investment grade rating.

That news pushed the stock and still has the implied substantially elevated to the realized historical measures. Specifically:

IV30™: 104.72
HV20: 72.49
HV180: 63.85

Let's turn to the Skew Tab to examine the line-by-line and strike-by-strike vols.

Unlike a bunch of other posts recently, the front month in MBI is actually depressed to the back months. The next earnings report for MBI should be in March (it has been for the last two years), so the elevated back to front is not earnings related. The parabolic shape in the Dec options is the sticky OTM option phenomenon in full effect. Those are $0.04 bid in the puts and cab bid in the calls.

Finally, the Options Tab is included for completeness.

Note than Jan vol -- essentially the IV30™ this close to expo.

Possible Trades to Analyze

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:

No comments:

Post a Comment