Friday, January 13, 2012

Ivanhoe Mines (IVN) - Stock and Vol Pop Right Now, Upside Skew Explodes to "Takeover" Like Levels

IVN is trading $18.98, up small with IV30™ up 9.7%. The LIVEVOL® Pro Summary is below.


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Ivanhoe Mines Ltd. (IVN) is an international mineral exploration and development company. The Company’s principal mineral resource property is the Oyu Tolgoi Project, located in Mongolia.

This another order flow note with some awesome looking skew to go with it. First, let's look at a bit of recent history. On 12-13-2011, IVN dropped 20% (ish) on news that Rio Tinto would consider raising its stake in the firm but not a takeover bid. I got that news from an AP article via Yahoo! Finance: K12, Ivanhoe, Urban Outfitters are big movers. We can see the stock move relative to the rest of the past 6 months in the Chart at the end of this article.

Let's start wit the order flow today. IVN has traded over 30,000 contracts on total daily average option volume of just 9,681. Calls have traded on a 7.7:1 ratio to puts with the Jan 21 calls trading over 15,500 times. Those Jan calls like like substantially purchases. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the Jan 21 calls are mostly opening (compare OI to trade size). We can also see that the Jan 22 calls show a large OI of 14,839. I believe that existing interest is short based on some action on 12-7-2011, where OI rose after a 1,600 lot traded @ $3.20 in a buy-write on a $3.20 x $3.40 market.

The Skew Tab snap (below) illustrates the vols by strike by month.

Here's where it gets interesting. The upside skew in IVN in Jan is super bid. Dare I say, super duper. Hmm, super duper reminds of Superbowl XIX -- Niners vs Dolphins; Niners held the high flying Dan Marino led Dolphins and receivers Mark Clayton and Mark "super" Duper down... Anybody?... No?...

I digress. The upside skew is bid, extraordinarily so in fact. That upside bend has been developing over the last month after starting out quite flat. I've included the skew for IVN as of 12-23-2011 (when Jan and Feb were also the front two months).

We can see how flat that skew "used to be." In fact, as I'm writing this article, IVN has popped an additional $0.40 (ish). The tick chart is included below.

Check out that pop right now! This feels like takeover rumor mania -- bid upside skew and a popping stock midday.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

We can see the abrupt drop on 12-13-2011, discussed above. IVN stock saw another flurry of selling in early Aug dropping for ~$26 to a teenager by mid/late Aug. On the vol side, we can see that even with the pop today, the implied is still trading well below the long-term historical realized vol. Let's see where this upside move and rumor-like order flow and skew lead.

This is trade analysis, not a recommendation.

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