Monday, December 5, 2011

RPC (RES) - Elevated Vol, M&A Spec and Calendar Spread

RES is trading $20.11, up 2.0% with IV30™ down 8.0%. The LIVEVOL® Pro Summary is below.


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Rare Element Resources Ltd (Rare Element) is principally engaged in the acquisition and exploration of mineral properties. As of June 30, 2010, the Company, through its wholly owned subsidiary, Paso Rico (USA), Inc., held 100% interest in a group of unpatented mineral claims and one leased state section, together known as the Bear Lodge Property.

I saw a quick news snippet from Briefing and have included it below:

"RPC (RES) early strength was attributed to M&A speculation."
Source: Provided by (

This is a vol note -- both wrt to elevated vol and wrt to a calendar vol diff. 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 underlying price has been a bit of a roller coaster ride with the most recent move to the upside. On the vol side we can see the implied is elevated to the two historical measures, though the implied is down notably in today's trading. The current vol levels are:

IV30™: 69.21
HV20: 58.35
HV180: 60.61

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

There is an upside tilt to the front month skew, reflecting upside risk, while the downside is sorta flat. The most obvious phenomenon here is the vol diff between the front two expirations with the Dec options priced about 15 vol points higher than the Jan options.

Finally, let's turn tot he Options Tab, for completeness.

We can see a bit of action today in the Dec 22.5 calls, substantially sales as I see it.

This is trade analysis, not a recommendation.

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