Radware (RDWR) - Stock Gaps on Takeover Rumor... Again...

RDWR is trading $39.09, up 19.3% with IV30™ up 8.9% on takeover rumors. The LIVEVOL™ Pro Summary is below.



I found this company through Top Scans --> High Option Volume. A snapshot is included below.



Here's a quick news snippet:
-----------------
[RDWR] jumped as much as 23 percent after Israeli newspaper Calcalist reported Riverbed Technology Inc. may seek to acquire it...

... HP, based in Palo Alto, California, is also in talks to buy Radware, according to Globes, another Israeli news service.

Source: Bloomberg
-----------------

The company has traded nearly 24,000 contracts on total daily average option volume of just 5,498. Over 20,000 calls have traded, yielding a 6:1 ratio to puts. The Dec 40 calls active with over 6,700 having traded.The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates action. We can see the Dec vol is up 13.2 points while Jan is up 4.1 points and Mar is actually down 5.6 points. Note how the back months are all priced below 50 vol, with the leaps in the 30's.



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



We can see that Dec is well above Jan. It is interesting to note that the skew is not very bid to the upside in Jan, and is somewhat muted in Dec given the news and stock move. I've included the Skew Tab as of Friday (just Dec) and we can see a much greater skew to the upside.



With this stock move up, the options market now reflects less upside risk (demand).

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 stock has gapped twice of late, once from $27 to $38, and today from $33 to $39.

Possible Trades to Analyze
1. For the small bets which potentially a big upside but low probability of success, look at the Dec 33 puts. A purchase there small for $0.15 seems reasonable, and bets on some sort of news that reverses today's move. Those puts closed ~ $1.90 on Friday.

2. If you think the stock will stay here (ish) for Dec and who knows after, analyze a calendar spread.
Sell the Dec 39 straddle @ $4.15 (or Dec 37/40 strangle @ $2.70)
Purchase the Jan 37/40 strangle for $5.20.
These trades sell 77 vol (ish) and purchase 60 vol (ish) and bet on a muted move from the current price through Dec expo. This trade is long the back month (which is long vega), so a definitive takeover announcement crushes this trade.

3. If you feel this stock will trail back down a bit but not a lot, try a Jan/Dec 36 put spread and pay $1.30. This purchases 62 vol and sells 73.

4. For a straight bullish play, purchase the Dec 40/45 call spread for $1.35. That's MaxGain:MaxLoss of 3.65:1.35 or 2.7:1. This spread requires RDWR to close above $41.35 if held to Dec expo.

5. Play it contrarian, sell the upside.

This is trade analysis, not a recommendation.

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Cninsure (CISG) - Chinese Insurer Does What?

CISG is trading $17.00, up 1.3% with IV30™ down 6.5%. The LIVEVOL™ Pro Summary is below.



CNinsure Inc. (CNinsure) is an independent insurance intermediary company operating in China.  This one has a weird story.

12-3-2010:
----------------------------
What: Shares of Chinese insurance company CNinsure (Nasdaq: CISG) went on a crazy ride today shooting 11% higher in early trading before plummeting to down 5%.

So what: Shares bounced on news the company would be buying back $100 million of U.S. shares by June 30, but then the market got a little confused. Isn't this the same company that issued $115 million of shares just this past summer? Wasn't it supposed to use the cash for growth?

Now what: Operations look to be strong and shares popped just last week on news that the CEO and CFO would be buying shares, but something seems a little off with this company. At the risk of missing out on a growth story, I'm going to stay away from a company that looks confused about its cash needs. I've seen one too many Chinese companies with surprise announcements that bash the stock to take a chance on this one.

Source: The Motely Fool. Written by: Travis Hoium
----------------------------

So, yeah... Sell stock to raise money, but then, buy stock... You know, the self scalp.... Weird...

Let's look to the Charts Tab. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



We can see the stock gap down on high volume on 11-4-2010, then again on 12-2-2010. The vols have also exploded, with IV30™ going from 42.73 on 11-3, up to over 95 on 12-3 (one month later).

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



We can see the vol term structure pretty clearly here. The front month is well above the second month, and the the second is well above the third. Looking to the Options Tab we can see the exact vols.



We can see that Dec vol is ~7 points higher than Jan, while Jan vol is ~14 points higher than Apr.

Dec IV: 94.29
Jan IV: 87.74
Apr IV: 73.35

I actually posted a trade on this guy on thestreet.com (OptionsProfits) so I can't get into specific trade analysis, but generally there seem to be a lot of trades on the board either spreading month to month or doing some creative intra-month trades. The downside looks pretty expensive still as well.  Granted, the risk is apparently quite high.

This is trade analysis, not a recommendation.

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First Solar (FSLR) - Calendar Spread on Two Good Vol Levels

FSLR is trading $131.55, up 0.4% with IV30™ up 3.2%. The LIVEVOL™ Pro Summary is below.



The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price >= $5
Sigma1 - Sigma2 >= 8
Average Option Volume >= 1,000
Industry != Bio-tech
Days After Earnings >=5 <=70
Sigma1, Sigma2 >= 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol Pro™.



The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated front month vol simply because earnings are approaching.

Looking to the Skew Tab (below), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).



We can see how the front month is elevated to the back.  Now we can turn to the Charts Tab (below), vol chart only. IV30™ - red vs HV20™ - blue vs HV180™ - pink.



I've highlighted the Dec vol and the Jan vol in the chart with small yellow lines. Here's a breakdown of the vols:

Dec IV: 53.01
HV180™: 46.82
IV30™: 44.74
HV20™: 42.90
Jan IV: 42.88

Note how Dec vol on it's own feels like a sale and Jan vol on it's own feels like a purchase. Together, they make a nice little trade.

Finally, let's look to the Options Tab (below).



Potential Trades to Analyze
1. Sell the Dec 130 straddle @ $9.70 (53 vol).
Buy the Jan 130 straddle for $16.00 (43 vol).
Pay $6.30.

2. Sell the Dec 125/135 strangle @ $5.50 (53 vol).
Buy the Jan 125/135 strangle for $13.60 (43 vol).
Pay $8.10.

3. Mismatch the strikes to try to pay less in the spread or sell 2x to 1x purchase.

4. Do just one side (purchase or sell).

5. Do nothing. $130 solar stocks are risky...

This is trade analysis, not a recommendation.

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Boyd Gaming (BYD) - Calls Active, Skew Turns on Short Stock Interest

BYD is trading $9.73, up 5.8% with IV30™ up 11.5%. The LIVEVOL™ Pro Summary is below.



On Nov. 15th Bloomberg released a list of the stocks with "TOP 25 INCREASES IN SHORT INTEREST VS FLOAT." BYD was on it, with 31.80% total short interest as of that date.

The company has traded 7,800 contracts on total daily average option volume of just 1,670. Calls have traded on a 38:1 ratio to puts, with the Jan 10 calls trading more than 5,700x. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size). The orders look like purchases, note that Jan vol is up 7 points while Dec is up 5.2 and Mar is up 1.6.



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



We can see the upside skew is bid for both the front two months. The call buying order flow has pushed vol.

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 how the IV30™ is just now crossing passed the HV20™ and HV180™. Or, in English, the short term implied has passed the short-term realized vol and the long-term realized.

This is trade analysis, not a recommendation.

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Commercial Metals (CMC) - Vol Rising, Upside Skew Bid

CMC is trading $16.65, up 0.2% with IV30™ down 2.4%. The LIVEVOL™ Pro Summary is below.



Yesterday the stock was up more than 4% with IV30™ popping over 15.5%. The Summary from yesterday is included below.



This is a stock with rising vol and stock price. Not surprisingly, today I found this stock using a real-time custom scan that hunts for high vols.

Custom Scan Details
Stock Price >= $7 and <= $70
IV30™ - HV20™ >= 10
HV180™ - IV30™ <= -8
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >=10 and <=60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20™) and the long term trend in stock movement (HV180™). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated IV30™ simply because earnings are approaching. The IDCC Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

 

We can see:
IV30™: 52.98
HV20™: 33.27
HV180™: 42.75

So, IV30™ is elevated relative to the short term and long term realized movement of the stock. Looking to the Skew Tab (below) we can see that the Dec ATM is priced ~47 vol and is substantially depressed to the Jan ATM. We can also see that the Dec upside is severely skewed up, which is "not normal" skew. Note also how the stock has ripped as of late.

 

Let's look to the Options Tab (below).



Possible Trades to Analyze
1. Sell the Jan 16/17.5 strangle @ $1.85 or about 52 vol.

2. #1 but cover with an upside call; the Jan 19 call can be purchased for $0.55. That yields a $1.30 credit and a max upside risk of $0.20.

3. Buy Dec 16/17.5 call spread for $0.70. That yields a 1.14:1 MaxGain:MaxLoss ratio, with $0.65 in parity.

This is trade analysis, not a recommendation.

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InterDigital (IDCC) - Elevated Vol

IDCC is trading $34.00, up 0.8% with IV30™ down 1.0%. The LIVEVOL™ Pro Summary is below.



I found this stock using a real-time custom scan. This one hunts for high vols.

Custom Scan Details
Stock Price >= $7 and <= $70
IV30™ - HV20™ >= 10
HV180™ - IV30™ <= -8
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >=10 and <=60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20™) and the long term trend in stock movement (HV180™). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated IV30™ simply because earnings are approaching. The IDCC Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

 

We can see:
IV30™: 50.11
HV20™: 38.29
HV180™: 29.84

So, IV30™ is elevated relative to the short term and long term realized movement of the stock.  It looks a vol sale over 43 would be reasonable, a purchase under 24 would also be reasonable.
Let's look to the Options Tab (below).



Note how high the Jan vol is. This is a great way to see how the IV30™ is a blended average of two months. Selling 43 (ish) vol would be reasonable, which is actually above the Dec 34 straddle. The Jan 34 straddle is priced at ~53 vol, but carries more risk.  The second month is priced at around 53 vol, or 9 points higher than Dec.

Possible Trades to Analyze
1. Sell the Dec 34 straddle @ $2.25 or 41 vol.

2. Sell the Dec 33/35 strangle @ $1.40 or 42 vol.

3. Sell the Dec 32/37 strangle @ $0.70. Note that the Dec 37 calls are 48 vol. Whoa... Takeover rumor?

4. #3, but cover the upside with a 38 call purchase for 0.25. That's a $0.45 credit, max upside loss is $0.55, naked downside.

Note for trades 1-3, those are naked short. I thin covering the upside in a takeover happy world is a good idea. Another approach is to sell meat (ATM) and buy OTM on a ratio, like 3:1. This should yield a premium if the stock sits and a nice win if the stock is taken over.

This is trade analysis, not a recommendation.

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Lyondellbasell (LYB) - Call Order Flow Explodes

LYB closed yesterday at $29.88, up 2.3%. The LIVEVOL™ Pro Summary is below.



Here's a quick note on a stock that would normally never make it on my radar, but the high one-sided option volume relative to the average makes it worth a quick write.

LYB together with its subsidiaries, primarily manufactures and sells chemicals and polymers worldwide.

The company traded over 25,000 contracts on total daily average option volume of just 1,303. The action was in the Dec 30 calls, which traded more than 21,000x, purchases as I see it. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size).  The OI as of this morning is now over 24,000, so that existing interest was also long.



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



What's odd is that the skew doesn't really show a change in shape, at least as of the close.  The stock has gone from ~ $15 in July, to now nearly $30.

This is trade analysis, not a recommendation.

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Banco Santander (STD) - Calls Trade on Stock Pop

STD is trading $10.37, up 7.8% with IV30™ down 3.9%. The LIVEVOL™ Pro Summary is below.



STD is a financial group operating principally in Spain, the United Kingdom, Portugal, other European countries, Brazil and other Latin American countries and the United States, offering a range of financial products.

The company has traded over 25,165 options on total daily average option volume of just 4,421. Calls have traded on a 3:1 ratio to puts with the action in the Dec 10 and Jan 11 calls. It looks like long interest today. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls in Dec are probably opening (compare volume to OI) and also at least some opening in Jan. Note that the Dec vol is up small today while Jan is down 3.7 points opening up a ~6 point vol difference month to month.



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



We can see term structure is pretty normal in that each month further back has lower vol and the skew shape is similar across all months.

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 stock has crumbled of late from mid $13 level to mid $9, then up today substantially.

This is trade analysis, not a recommendation.

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Patriot Coal (PCX) - Low Vol May Yield Trade

PCX is trading $16.81, up 3.9% with IV30™ down 5.4%. The LIVEVOL™ Pro Summary is below.



PCX is a producer of coal in the eastern United States, with operations and coal reserves in Appalachia and the Illinois Basin. It is also a producer of metallurgical coal.

I found this stock using a real-time custom scan. This one hunts for low vols.

Custom Scan Details
Stock Price >= $7
IV30™ - HV20™ <= -8 >= -40
HV180™ - IV30™ >=7
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >= 32

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol Pro™.



The goal with this scan is to identify short-term implied vol (IV30™) that is depressed both to the recent stock movement (HV20™) and the long term trend in stock movement (HV180™). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not purchasing depressed IV30™ relative to HV20™ simply because of a large earnings move.

The PCX Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.





We can see:
IV30™: ~56.67
HV20™: 66.26
HV180™: 65.55

So, IV30™ is depressed relative to the short term and long term realized movement of the stock.

Finally, let's look to the Options Tab (below).



Possible Trades to Analyze
1. Buy the Dec 17 straddle for $1.59.

2. Buy the Dec 16/17 strangle for $1.16.

3. Ok, more creative than naked long options:
Buy the Dec 16/17 strangle for $1.16
Sell the Dec 14/19 strangle @ $0.25

4. Risk lovers:
#3 but sell the Jan 12.5 puts @ $0.20... Or do those twice... Oo...

PCX 52 wk range is [$9.76, $24.25], which is pretty freakin' wide.

This is trade analysis, not a recommendation.

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Ciena (CIEN) - Time Spread

CIEN is trading $15.24, up 0.7% with IV30™ down 3.0%. The LIVEVOL™ Pro Summary is below.



The stock just came up on a real-time scan, not the custom one though. This one hunts for calendar spreads between the front two months.

The snapshot of the scan is included (below).



Looking to the Skew Tab (below), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).



We can see how the front month is elevated to the back, or in English, the red line is above the yellow line. I've highlighted the three ATM strikes.

Now we can turn to the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



What I'm interested in here is the vol portion. Check out the IV30™ is relative to the short-term historical vol (HV20™) and the long-term historical vol (HV180™). Specifically:

IV30™: 40.18
HV20™: 31.38
HV180: 40.33

Selling 44 vol seems reasonable, purchasing 30 vol on the flip side also seems reasonable.

Finally, let's look to the Options Tab (below).



Potential Trades to Analyze
1. Sell the Dec 15 straddle @ $1.12 and purchase the Jan 15 straddle for $1.75 for a net debit of $0.63. This sells ~ 44 vol and purchases ~ 38 vol. I like the sale more than the purchase.

2. Sell the Dec 14/16 strangle @ $0.41 and purchase the Jan 14/16 strangle for $0.93 for a total debit of $0.52. This sells ~45 vol and purchases ~38 vol. I actually like this trade a bit more as it's cheaper, has more room for CIEN to move in Dec while still "winning" and sells some skew to the downside.

3. Do a Dec/Jan put spread or call spread. It looks like about 7 vol points in the difference.

4. And, for you risk lovers...
Sell the Dec 14 puts @ $0.16 (47 vol)
Sell the Dec 17 calls @ $0.08 (44 vol).
Purchase the Jan 16 calls for $0.52 (36.5 vol)
That's a net debit of $0.26 to own $1 of upside in CIEN for Dec, then just the call in Jan if Dec expires worthless, while being naked the downside for Dec.

This is trade analysis, not a recommendation.

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