Monday, July 30, 2012

McMoran Exploration (MMR) - Elevated Vol Points to Risk Event This Week

MMR is trading $13.95, up small with IV30™ up 0.7%. The LIVEVOL® Pro Summary is below.


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McMoRan Exploration Co. (McMoRan) is engaged in the exploration, development and production of oil and natural gas in the shallow waters (less than 500 feet of water) of the Gulf of Mexico and onshore in the Gulf Coast area of the United States.

This is a vol note on a stock that appears to have a vol event coming in the next five trading days (but not earnings). Let's turn to the the Charts Tab (six months), 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, while there have ebbs and flows, ultimately, the stock is pretty close to where it was six months ago, and in the middle (ish) of its 52 wk range of [$7.76, $17.33].

On the vol side, we can see the story. The implied has been rising of late and is now nearing an annual high. The 52 wk range in IV30™ is [45.35%, 116.95%], putting the current level in the 94th percentile (annual). I note that the least earnings report was in mid Jul and the next one isn't due out until mid Oct (ish). So, while something clearly is due out, it's not earnings (though it could be an update of some sort).

The Skew Tab (below) helps us zero in on a date for the vol event.

Note that the red curve represents the Aug3 weekly options. We can see a monotonic increase in vol from the back to the front, with a huge vol diff open between the weekly options and the monthly expiries. In English, the options reflect elevated risk in the near-term (weekly options), so it's a reasonable assumption that "something" is due out this week.

Finally, let's turn to the Options Tab, for completeness.

Across the top we can see the vols by expiry are 175.93%, 122.56% and 94.38% for Aug03(W), Aug and Sep, respectively. Whatever the vol news is, since the risk is reflected in the options, the event is not a surprise, though where the stock goes from here is uncertain (duh).

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