Friday, March 16, 2012

Frontline (FRO) - Stock and Vol Pop on Industry Report

FRO is trading $7.55, up 22.1% with IV30™ up 46.8%. The LIVEVOL® Pro Summary is below.


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Frontline Ltd. is a shipping company. The Company is engaged primarily in the ownership and operation of oil tankers and oil/bulk/ore (OBO) carriers.

This is a vol, order flow and stock price note all based on a research report that came out today. Here's the news as summarized by Briefing:

Frontline: Tanker rates to be very well supported in the coming weeks - Dahlman Rose

Dahlman Rose notes, there has been a surge in spot market activity during the past week with Saudi Aramco's shipping arm. The firm says, the overall fundamentals of the tanker market remain weak due to new building supply outpacing global import demand growth this year, but this dynamic is likely to take a back seat in the coming months as more oil flows in an effort to minimize the impact of lost Iranian oil will take hold. As such they expect tanker rates to be very well supported in the coming weeks, which positions spot-exposed tanker companies to realize their highest 2Q earned rates since perhaps 2008.

Source: Provided by (

That news has pushed vol up nearly 50% and the stock up more than 22%. let's start with the order flow. The company has traded nearly 23,000 contracts on total daily average option volume of just 1,840. Calls have traded in a 3.3:1 ratio to puts. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates the action. There look to be opening positions in the Apr 7 and 8 calls as well as the May 8 and 9 calls (compare OI to trade size). All but the May 9 calls appear to be substantially purchases. The May 9 calls are ambiguous, but my best guess would actually be sales.

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

The shapes across the months are consistent and "normal." The upside calls haven't reacted so abruptly as to break the shape of the term structures.

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).

On the stock side we can see the recent rally that has seen the stock rise from $5.49 as of two days ago, to now over $7.50. That's more than 37% in two trading days. On the vol side, we can can see how the implied has popped with the stock today -- up nearly 50%. It is interesting to note that even with this vol pop, the IV30™ is still in the 42nd percentile (annual).

In terms of 52 wk ranges, try this: The stock price annual range is [$2.52, $24.86]. Gulp... The IV30™ annual range is [28.68%, 153.13%]. Double gulp...

This is trade analysis, not a recommendation.

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