Eastman Kodak (EK) - July is Coming, and so is the Vol

EK is trading $3.14, down 0.9% with IV30™ up 1.9%. The LIVEVOL® Pro Summary is below.



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Eastman Kodak Company (Kodak) is engaged in the sale of imaging products, technology, solutions and services to consumers, businesses and professionals.

This is a note mostly in reference to vol and to yesterday's order flow, which is the continuation of an accumulated position in July. Mike Bristow of Vtrader Group pointed this one out to me.

Let's start with yesterday's stats and vol (below).



We can see that IV30™ jumped 12.2%. Calls traded on a 4:1 ratio to puts with the action in the Jul 3.5 and 4 calls (more than 18,000 traded). We can see the existing OI in those lines was (is) larger than the trade volume. Let's look to the Options Tab as of this morning.



The OI jumped to 51,210 and 71,039 in the Jul 3.5 and 4 calls, respectively, so the order flow yesterday was the continuation of an accumulated position. I believe that position is long in both calls.

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



It's no secret that EK stock has been collapsing for several years now. Once a Dow component, the company is now bordering on penny stock status (though the market cap is still ~ $800 million). On the vol side, the IV30™ was 66.19 on 5-27-2011 (so two weeks ago). As of this writing, IV30™ has climbed to 96.48, so a 45.7% increase.

Looking to the monthly vols, we can see Jul is 97 (ish) while Jun, Oct, Jan'12 and Jan'13 are in the low sixties. In English, some thing's coming this July -- and the option order flow is getting long that vol and long the deltas.

Possible Trades to Analyze

This is trade analysis, not a recommendation.

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Rubicon Technology (RBCN) - Calendar Spread and a Cool Name

RBCN is trading $21.98, up 1.4% with IV30™ unched. The LIVEVOL® Pro Summary is below.



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Rubicon Technology, Inc. (Rubicon) is an electronic materials provider, which develops, manufactures and sells monocrystalline sapphire and other crystalline products for light-emitting diodes (LEDs), radio frequency integrated circuits (RFICs), blue laser diodes, optoelectronics and other optical applications.

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 month-to-month and line-by-line vols.



We can see how the front month is elevated to the back. More specifically, it looks like the vol diff between the OTM options is greatest (see the 21/24 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).



The vol is fair value (ish) as IV30™ is in between HV20 and HV180. Specifically:

IV30™: 52.16
HV20: 41.95
HV180: 53.05

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



Potential Trades to Analyze
1. ATM calendar:
The Jun/Jul 22.5 straddle calendar sells ~7 vol pointed higher than it purchases.

2. OTM Calendar:
The Jun/Jul 21/24 strangle calendar sells ~ 57 vol and purchases ~48 vol. Interestingly the Jun strangle vol is price over HV180 (long-term historical trend) and the Jul strangle vol is priced under the HV180.

On a side note, I love this company's name... The movie I just wrote/directed/produced is called Rubicon's Broken (http://www.RubiconsBroken.com). We're still in post-production so the website is in pre-aplha, but if you TURN UP THE VOLUME, you'll get the idea (you can roll over the names on the images as well).

This is trade analysis, not a recommendation.

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Cameron Int'l (CAM) - Elevated Vol

CAM is trading $45.26, up 1.6% with IV30™ down 1.6%. The LIVEVOL® Pro Summary is below.



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Cameron International Corporation (Cameron) provides flow equipment products, systems and services to global oil, gas and process industries.

I found this stock using a real-time custom scan. This one hunts for high vols. I wrote about this stock for TheStreet.com (OptionsProfits) so no specific trade analysis.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20™ GTE 10
HV180™ - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 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 CAM 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™: 38.92
HV20: 26.89
HV180: 30.71

So, IV30™ is elevated relative to the short-term and long-term realized movement of the stock. The price has been headed straight down in the last four months (ish) – this was actually a $62 stock not too long ago.

Let’s turn to the Skew Tab and look at line-by-line vols.



The skew is pretty normal looking – downward sloping, but there aren’t any specific strikes that stand out.
Let's look to the Options Tab (below) for completeness.



This is trade analysis, not a recommendation.

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Office Depot (ODP) - Vol Explodes, Calls Trade, Stock Near New Low

ODP is trading $3.57, down small with IV30™ popping up 48.6%. The LIVEVOL® Pro Summary is below.



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Office Depot, Inc. (Office Depot) is a global supplier of office products and services. The Company operates in three business segments: North American Retail Division, North American Business Solutions Division and International Division.

The company caught my eye because of the vol pop today. While it's substantially call buying, there's a little more going on here than that...

The company has traded over 46,000 contracts on total daily average option volume of just 2,699. Calls have traded on a 67.1 ratio to puts with the action in the Jul 3.5 and 4.5 calls as well as the Jan'12 5 calls. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the Jul 3.5 calls are mostly opening (compare OI to trade size), and I believe those are long. The Jul 4.5 calls also look long, but OI is over 14,500 (so greater than trade size). My best guess is that the Jul 4.5 call OI is long as well, meaning that OI should pop substantially as of tomorrow. Finally, the Jan'12 5 calls have traded over 7,500x on OI of 15,514. The calls are long today, and that existing interest also looks long. So basically, call buyers are losing their minds... right? Well, how about this...

The Jan'12 5 calls were bot for $0.29 against $3.47 stock. I looked up the equity trades near the trade time in LVP and see the trade was tied to 400,000 shares (i.e. GTE 50 delta). In English, that "call buyer" was really more like a synthetic put buyer, or at the very least, a straddle buyer. That ain't bullish...



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



We can see the upside vol in both the front two months is rising to the OTM calls. Oct also has that shape, though it's much less pronounced and vol does fall off after the 4.5 strike.

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 been going straight down of late. This was a $6 stock in Feb and ~ $4.80 in mid May. On the vol side, IV30™ has risen sharply today, up nearly 50%, and is now substantially higher than the HV20 and HV180.

Possible Trades to Analyze
With vol high and stock low, this is a natural time to examine a buy-write. Hypothetically that's buying "low" stock and selling "high" vol. The risk of course is that this thing goes to zero (or whatever). The bets are rolling in and who knows where this thing ends up. The 52 wk. low is $3.36 and we're not too far from that...

This is trade analysis, not a recommendation.

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Visa (V) - Vol Rising on Congressional Hearing

V is trading $77.44, down 3.0% with IV30™ up 5.9% as of ~9:50am EST. The Livevol® Pro Summary is included below.



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Visa Inc. (Visa), incorporated in May 2007, is a global payments technology company that connects consumers, businesses, banks and governments in more than 200 countries and territories, enabling them to use digital currency instead of cash and checks… You know, Visa…

I wrote about this one for TheStreet.com (Options Profits) so no specific trade ideas here. But this is a cool one.

There is news, and here it is:
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WASHINGTON (MarketWatch) — Senators will have to choose whether they support their local banks or their local retail outlets when they vote Wednesday afternoon on a measure that would delay the Federal Reserve from cutting debit card interchange costs.

[…]

Without the legislative change, the Fed is expected to adopt a proposal it introduced that would be a boon to retailers because it cuts debit interchange fees charged to them by an average of 73%. By one estimate, every month banks collect $1.3 billion in fees from U.S. consumers using debit cards mostly at retail outlets.

The Fed is required to adopt the rule — which significantly lowers costs for retail outlets like Wal-Mart Stores Inc. and Target Corp.— because of a provision inserted by Sen. Dick Durbin, an Illinois Democrat, into the sweeping Dodd-Frank bank reform legislation.
Source: MarketWatch
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As a reminder to how big a deal this is for the credit card guys V and MA, let’s turn to the Charts Tab (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 collapse for V on 12-16-2010. A quick news snippet from that day is included below:

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The Federal Reserve released proposed limits on debit-card fees, offering alternative plans that would allow charges as high as 12 cents per transaction.

One of the proposals may set the cap as low as 7 cents, according to documents posted by the Fed today on its website.
Source: Bloomberg
---

On 12-15-2010, the IV30™ hit ~ 32, as of today it’s around 35 – so vol is elevated.

With more news due out today (maybe), the term structure shows elevated vol in the front relative to the back. Let’s turn to the Skew Tab.



This is a little tricky – note that the red curve represents the Jun10 weekly options – it’s the yellow curve that represents the Jun monthly options.

Ideally, when I see a term structure like this and no earnings event in the elevated months, a calendar spread feels reasonable. But in this case, given the large move that V made last time on potentially similar news, I can’t get a feel for “fair” vol. Do you want to own it or do you want to be short the gamma? How about neither?

For completeness, let’s look to the Options Tab.



We can see the three day straddle for V is priced at ~$4.60 fair value or ~ 75% annualized vol on a stock that has moved with HV180 at 26.94%. Yeah, that’s elevated… and it might not be enough.

This is trade analysis, not a recommendation.

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Pre-Market: 6-8-2011

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This is trade analysis, not a recommendation.

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Legal Stuff:
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Temple-Inland (TIN) - Knowing Trading Ahead of Hostile Takeover Bid

TIN is trading $29.38, up 39.8% on a takeover with IV30™ down 31.3%. The LIVEVOL® Pro Summary is below.



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Temple-Inland Inc. manufactures corrugated packaging and building products, which the Company considers as two separate operating segments.

So, here's the news:
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Temple-Inland Inc.’s shares soared 40% a day after International Paper Co. made a $3.31 billion hostile bid for the maker of corrugated packaging and building products.
Source: MarketWatch, by Kate Gibson and William Spain
---

DealB%k further wrote that:
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Temple-Inland said on Tuesday that it had instituted a shareholder rights plan in its effort to fend off an unsolicited $3.3 billion takeover bid by International Paper.
Source: DealB%k, by MICHAEL J. DE LA MERCED
---

What I'm writing about though is some order flow that looks a bit... lucky?...
First, let's look to some stats. Even including some massive order flow on May 25th, the last 60 days have averaged 663 total calls traded a day, and 1,290 total options. A small snippet of the Stats Tab is included below.



Now, let's look to the Options Tab today and Day's biggest trades snap on May 25th (below).





While the company was averaging about 500 calls a day, 6,425 Jan'12 25/30 call spreads were bought for $0.90 (that's 12,850 total calls in a single print). That $0.90 call spread is now worth ~$3.30.

So a trade that equalled ~1,000% of total daily average volume and ~2,000% in the daily average volume of calls makes $1.5MM in two weeks. Nice trade... right?...

PnL Calc
6,425*100*($3.30 - $0.90) = $1,542,000

This is trade analysis, not a recommendation.

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Community Health Systems (CYH) - Elevated Vol on Billing Allegations

CYH is trading $25.92, up 1.9% with IV30™ down 1.5%. The LIVEVOL® Pro Summary is below.



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Community Health Systems, Inc. is an operator of hospitals in the United States. The Company provides healthcare services, through the hospitals that it owns and operates in non-urban and selected urban markets throughout the United States.

On 4-11-2011, this stock collapsed down nearly 36% ($14.41) on a nasty allegation from THC. I’ve included a news snippet, below from Bloomberg which also touches on the SDS market:

“Credit-default swaps on Community Health Systems Inc. (CYH) and Tenet Healthcare Corp. (THC) soared after Tenet sued the hospital operator for allegedly overbilling Medicare.”
Source: Bloomberg, Community Health, Tenet Default Swaps Climb on Overbilling Suit written by Mary Childs.

I posted this one to TheStreet.com's OptionsProfits, so no specific trades discussed here. Today, CYH 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 GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

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.

Let’s first 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).



We can see the stock drop on the allegation of overbilling from THC. The stock price recovered small for a while but is back to dipping down. The IV30™ popped ~15% on 6-6-2011 as CYH dipped another 5% on 6-6-2011. Right now the IV30™ is in between the the short-term historical vol (HV20) and the long-term historical vol (HV180). Specifically:

IV30™: 56.09
HV20: 30.72
HV180: 66.35

Let’s look to the Skew Tab (below) to examine month-to-month and line-by-line vols.



We can see how elevated the front month (red) is to the second (yellow). The next earnings release is due out at the end of July (projected), so the elevated vol in Jun is not reflecting an earnings date, rather some “other” risk – likely the lawsuit/allegations.

The skew difference between Jun and Jul widens to the downside pointing to downside near-term risk compared to further out.

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



This is trade analysis, not a recommendation.

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Pre-Market: 6-7-2011

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Download as .pdf: PDF Download



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This is trade analysis, not a recommendation.

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Legal Stuff:
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InterDigital (IDCC) - Vol Rising, Puts Trade

IDCC is trading $37.46, down 1.1% with IV30™ up 4.5%. The LIVEVOL® Pro Summary is below.



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InterDigital, Inc. (InterDigital) designs and develops advanced digital wireless technologies for use in digital cellular and wireless IEEE 802-related products and networks.

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.

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



We can see how the monotonic term-structure as the front months are more expensive than the back. This feels like an event is coming, but it's not earnings. In fact, earnings are due out (projected) after the July cycle, so they would be in the Sep cycle (and Aug when it comes out). The Sep cycle is priced 26 points lower in vol than Jun, or said differently, Jun is is nearly 50% higher vol than Sep.

The order flow has shown what looks like a double down of long puts in Jun on the 35 strike and opening puts in Jul 30 and 35, also long.  So, in English, substantive OTM put buying in the front two months.

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).



Check out how high IV30™ is relative to the short-term historical vol (HV20™) and the long-term historical vol (HV180™). Specifically:

IV30™: 64.76
HV20: 39.49
HV180: 40.96

Again, that rising vol points to a vol event/news coming out in this options cycle.

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



Potential Trades to Analyze
This is certainly one that requires knowledge of the news that's driving vol up. Doing a calendar gets short gamma, and that might be the absolute worst thing to do right now... Then again...

This is trade analysis, not a recommendation.

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