Friday, December 16, 2011

VirinetX (VHC) - Elevated Vol and Possibility of Annual Highs or Lows by Jan

VHC is trading $21.51, up 2.3% with IV30™ unched. The LIVEVOL® Pro Summary is below.


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VirnetX Holding Corporation (VirnetX) is a development-stage company. The Company is engaged in developing and commercializing software and technology solutions for securing real-time communications over the Internet.

This is a vol note and a sort of companion piece, or continuation, of a note I posted on 10-12-2011. You can read that post here:

VirnetX Holding (VHC) - Elevated Vol in a Market of Dipping Vols

At the time of that writing, I noted that the overall market vol was dipping while VHC remained elevated. I've included the Symbol Summary on that date, below.

Since then the stock has moved up 34.7% while the IV30™ remained elevated but come off those Oct levels by about 16 percentage points or 11.8%.

Let's turn to the Charts Tab (6 months), below, as of today. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

I've highlighted the stock and vol at the time of the last article. We can see that while the implied was higher in Oct, the vol diff between the implied and short-term historical realized vol has actually grown. Here are the vol comps, both today and on 10-12-2011.

IV30™: 115.64
HV20: 72.35
HV180: 102.24

IV30™: 131.13
HV20: 113.09
HV180: 100.60

So, what was an 18 vol point diff between IV30™ and HV20 is now a 43.29 vol point diff. In this sense, while the implied is lower, the vol is "more elevated" relative to the historical measures.

Let's turn to the Skew Tab, below.

The skew is rather rickety, but more than that, the OTM options are essentially increasing in vol to both the upside and the downside -- a parabolic skew.

Let's turn to the Options Tab.

The 52 wk range in VHC is [$11.07, $41.77], and the Jan 42 calls are nickel bid @ $0.35. The Jan 11 puts are nickel bid @ $0.50.

Even more impressive, the Mar 55 calls are $0.45 x $0.55 and the Mar 8 puts are $0.35 x $0.60.

So, basically, aside from all the numbers 'n stuff 'n stuff 'n stuff, the option market reflects a good deal of risk and some non-trivial probabilities that the stock finds a new annual high or low by Mar or even Jan.

This is trade analysis, not a recommendation.

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