Amkor Technology (AMKR) - Vol Explodes, Bets in Aug Double All Other Existing Positions

AMKR is trading $6.38, up 8.0% with IV30™ exploding up 53.7%. The LIVEVOL® Pro Summary is below.



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Amkor Technology, Inc. (Amkor) is a provider of outsourced semiconductor packaging (assembly) and test services.

The vol is popping, the options are active, but I don't know why... The company has traded over 28,000 contracts on total daily average option volume of just 278. Calls have traded on an 11:1 ratio to puts with the action focused in the Aug 6 calls where more than 21,000 have traded. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the Aug 6 calls are mostly opening (compare OI to trade size). Here's a stat for you: The total OI on all lines for all months in AMKR was 10,861 as of this morning. That should put the 21k+ calls in context in terms of size. Said plainly, the bets today in the Aug 6 calls are larger than all existing bets on all other lines in all other months by two fold.



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



The shape of the skew is pretty surprising to me. Both months (Aug and Sep) show downward sloping skews to the OTM calls. There is an elevation between the Aug 6 calls (where the trades are) and the Sep 6 calls -- but only five points. More holistically, Jul vol is up 13.5 points (36.7%), Aug vol is up 21.6 points (51.2%) and Sep vol is up 12.9 points (29.4%). Or, in English, Aug vol is reacting the most to the order flow (which makes sense)

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).



The 52 wk. range in stock price is [$5.05, $8.49] and the 52 wk. range in IV30™ is [$37.39, 80.80]. The 80 vol day was on 7-22-2010, when the stock price closed at $5.76.

Possible Trades to Analyze
Buying vol feels expensive relative to the historical measures, BUT, the Aug 6 straddle is worth ~$1.20. With the flow today and the stock moving ~$0.50, maybe that isn't high enough?... The Jul 6 puts are no bid @ $0.10. That feels cheap too, no?

Either way, it's all about the news -- so figure that out, then analyze some trades.

This is trade analysis, not a recommendation.

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Swift Transportation (SWFT) - Stock Moves Higher on "Right" Investors

SWFT is trading $14.19, up 2.1% with IV30™ up 4.2% as of ~ 10:30am EST. The Livevol® Pro Summary is included below.



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Swift Transportation Company (Swift), formerly Swift Holdings Corp., is a transportation services company and a truckload carrier in North America.

I read an interesting article today that claimed a large number of institutions are starting to accumulate the stock and that may be responsible for the climbing price. Here’s a quick snippet of the article:

Since its December 2010 IPO, Swift Transportation (SWFT) went from 13 filers at the end of 2010 to 104 as of the end of Q1 2011. What’s interesting is that a lot of these filers are small cap growth & value hedge funds.
Source: Seeking Alpha, written by Alpha Stratus

Let’s start with 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 stock has been headed straight up of late while the IV30™ has remained elevated to the historical measures (both long- and short-term). The upward momentum in the stock price is met with elevated vol in the calls in the front month relative to the back. Let’s turn to the Skew Tab from Livevol® Pro.



I’ve highlighted the vol diff between the 15 strikes in Jul and Aug. Specifically, the Jul 15 calls are priced at 55.4 vol, while the Aug 15 calls are priced at 39.9.

The last (and only) earnings report for SWFT was 4-26-2011. If we project earnings later than Jul 16th, then the next earnings cycle would be in the Aug options cycle, not Jul. In other words, the depressed vol in Aug relative to Jul includes a volatility event.

Let's turn to the Options Tab, below.



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis, here. I will say that doing a calendar would mean being short the gamma in Jul. With the stock’s momentum and the elevated vol (which does reflect elevated risk), that could be risky.

This is trade analysis, not a recommendation.

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Urban Outfitters (URBN) - Sales Data Tomorrow Pushes Skew Today in OTM Calls

URBN is trading $30.85, up 6.0% with IV30™ up 17.8%. The LIVEVOL® Pro Summary is below.



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Urban Outfitters, Inc. (Urban Outfitters) is a lifestyle specialty retail company that operates under the Urban Outfitters, Anthropologie, Free People and Terrain brands.

This is a quick note to draw attention to the June sales data that's coming out tomorrow and how the news and order flow affect the skew. Here's a quick snippet:

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Retail stocks are moving ahead of Thursday’s release of June sales activity.

Urban Outfitters, up nearly 7%, is expected to report strong numbers. Same goes for Abercrombie & Fitch, which is 1.6% higher today.
Source: Retail Shares Sneak Higher Ahead of Thursday’s Release of June Data, by Dave Kansas.
---

The Jul 32 calls have been the most active line with over 6,700 having traded on just 277 existing OI. The order flow looks like purchases and the popping vol in Jul (39% day over day) is confirming evidence.



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



The order flow in the Jul 32 calls has affected the skew. This is one of my favorite phenomena in option trading -- where a single line vol gets out of whack based on order flow and the surrounding strikes don't react fast enough. It's real world price discovery that we can easily observe.

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).



The stock gapped down on the earnings cycle in early Mar. We can also see the IV30™ is just now rising above the HV20 and HV180 -- which makes sense given the embedded vol event coming tomorrow.

This is trade analysis, not a recommendation.

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Kinetic Concepts (KCI) - LBO News and Vol

KCI is trading $65.85, up 12.0% or $7.07. The LIVEVOL® Pro Summary is below.



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Kinetic Concepts, Inc. (KCI) is a global medical technology company, which is engaged in the discovery, development, manufacture and marketing of therapies and products.

The news driving the stock surrounds a potential sale of the company. I've included a snippet from the Motley Fool below:

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Shares of wound-care products specialist Kinetic Concepts climbed 12% in early Wednesday trading on news that it is in talks to go private in a leveraged buyout.

[...]

Citing people close to the matter, Bloomberg reported that Kinetic is negotiating a sale with a group of private equity firms for a deal possibly valued at more than $5 billion -- or a greater than 16% premium to yesterday's closing price.
Source: Kinetic Concepts Shares Popped: What You Need to Know by Brian D. Pacampara.
---

The company has traded nearly 4,400 contracts on total daily average option volume of just 215. Calls have traded on a 3.5:1 ratio to puts. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates the action -- the Aug 65, Jul 67.5 and Jul 70 calls are the most active, respectively and all of them have zero existing OI. Given that vol is up 16.1 points in Jul and 2.7 points in Aug, it feels like most of this flow is long options.



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



It is interesting to note that the ATM strike (65 line) shows the largest vol diff between the front and the two back months. Hmmm...

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).



The stock has been trending up for most of the year and then the pop today on the potential LBO. On the vol side, we can see IV30™ popping in the news, reflecting increased risk of stock movement, unlike a "normal" takeover where vol can often collapse.

Possible Trades to Analyze
There are a bunch of ways to analyze trades on this news, I've just included a few, below. Note that the option markets are incredibly wide right now, so execution and slippage risk are noteworthy.

1. Calendar Spread the ATM
Owning the Aug 65 puts against the Jul 65 puts scalps some vol and buys time (and potentially stock movement).

2. Buying the downside
It can happen that stocks with this news pop and then drift down in the following days or weeks if no supporting news comes out. Considering this was a $58.78 stock at the close yesterday, the 60 puts in Jul or Aug could be interesting options to own. Maybe even a calendar of those two, as there's ~14 point vol diff to be had there on the 60 line.

3. Ratio Call Spreads
Another approach could be to analyze the Aug 65/67.5 1x2 call spread. This is safe to ~$69 to the upside and wins with the stock in ($66, $69) ish...

This is trade analysis, not a recommendation.

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Gap (GPS) - Vol Pattern to Earnings

GPS is trading $18.25, up 0.4% with IV30™ up 0.6%. The LIVEVOL® Pro Summary is below.



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The Gap, Inc. is a global specialty retailer offering clothing, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta brands.

I’ve been on a calendar spread kick of late as Jul vol has remained elevated for a number of companies relative to the approaching earnings cycle in the Aug options. GPS also has come up on the real-time custom scan that hunts for calendar spreads between the front two months. The next earnings report is due out after Jul expo.

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 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).



Last year the summer earnings report for GPS was released on 8-9-2010 and this year I see the report date is set for 8-18-2011 on the company’s IR site. The Aug options expire on 8-20-2011 meaning the depressed vol in Aug to Jul does include earnings.

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).



Here’s where it gets interesting. The last earnings report on 5-19-2011 AMC catapulted the stock down 17%. In other words, the stock can move on earnings, so owning that vol for less than Jul may be an interesting play.

On the vol side, the IV30™ is well above the short-term historical vol (HV20) and about equal to the long-term historical vol (HV180). Specifically:

IV30™: 33.27
HV20: 21.31
HV180: 33.15

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



I wrote about this one for TheStreet.com (OptionsProfits) so no specific trade analysis here -- but the vol diff may be worth some analysis.

This is trade analysis, not a recommendation.

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InterDigital (IDCC) - Stock Pops on Patents, Vol Pops Twice

IDCC is trading $45.14, down 3.7% with IV30™ up 3.8%. The LIVEVOL® Pro Summary is below.



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InterDigital, Inc. (InterDigital) is a holding company, and its various subsidiaries engage in technology research and development activities or in the prosecution, maintenance, enforcement, and licensing of patents.

The stock popped more than $6 on Friday on interesting news in a similar company. I've included a snippet from The Motely Fool:

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InterDigital popped 17% in intraday trading today. The strength in bids for Nortel's patents was surprising and bodes well for the value of InterDigital's patent portfolio.

InterDigital makes money from patent licensing. It owns 8,800 U.S. and foreign patents, and has nearly 10,000 patent applications pending, primarily related to wireless communications. The strong demand and high bids for Nortel's communications patents are shedding new light on the earnings potential of InterDigital's intellectual property.
Source: InterDigital Shares Popped: What You Need to Know
---

Today, the stock shows up on the real-time custom scan 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 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 turn to the Skew Tab, (below).



There's a pretty clear elevated vol in Jul relative to Aug. The next earnings date for IDCC should be in the Aug cycle. The last earnings date was 4-27-11. Last year, with earnings on 4-28-2010, the Jul cycle was 7-28-2011, so there you go... The vol is elevated in Jul because the recent news and stock movement off of that news.

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).



We can see the stock pop of late. Note also the stock gap down two earnings cycles ago. On the vol side, the IV30™ continues to rise today and remains above the historical measures. Specifically:

IV30™: 67.68
HV20: 59.30
HV180: 44.99

So the stock was up $6.02 on Friday, ad is now down $1.73, today. The volatility feels like it should be elevated.

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



Potential Trades to Analyze
There are a bunch of ways to trade this -- all essentially pure speculation.

1. Calendar spreads:
a. The Jul/Aug ATM call spread sells ~76 vol and purchases ~66 vol while owning earnings.
b. The Jul/Aug OTM call spread sells ~78 vol and purchases ~66 vol while leaving more room for stock movement in Jul, easing up on the gamma.

2. Sell vol:
a. The ATM straddle is worth ~$4.90. A sale gives room to ~$40 and ~$50 on Jul expo. But the again, the stock moved $6.02 on Friday.
b. Selling the ATM straddle and covering with the 41/50 strangle collects ~$3.00 and wins if IDCC is in ($42, $48) while risking $2.

3. Buy Vol:
Buying the downside on a 1x2 is an interesting trade. The Jul 45/42 1x2 put spread can be done for ~even and wins with IDCC below $45 to the downside (but above $39), with no upside risk.

This is trade analysis, not a recommendation.

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Cemex S.A.B. (CX) - Elevated Vol to Earnings

CX is trading $8.45, down 2.4% with IV30™ up 7.7% as of ~11:15am EST. The LIVEVOL® Pro Summary is below.



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CEMEX, S.A.B. de C.V. (CEMEX) is a global cement manufacturer with operations in North America, Europe, South America, Central America, the Caribbean, Africa, the Middle East and Asia. CEMEX, S.A.B. de C.V. was founded in 1906 and is based in Garza Garcia, Mexico.

The stock just came up on the real-time custom scan that searches for calendar spreads between the front two months. I’ve used this one several times for OP – let’s try it again.

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 look to the Skew Tab (below) to examine the month-to-month and line-by-line vol shape.



We can see how the front month is elevated to the back – the red dot is the ATM vol in Jul. I checked the CX investor relations website and they have posted on their calendar that the next earnings release is 7-22-2011. That means earnings are in the Aug options cycle, not Jul, yet Jul is elevated to Aug.

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. IV30™ is up today and has now crossed higher than the short-term historical vol (HV20) and the long-term historical vol (HV180). Specifically:

IV30™: 35.52
HV20: 32.67
HV180: 33.95

For the last four earnings cycles, the front month ATM straddle vol was ~50, ~46, ~42 and ~36, respectively. Finally, let's look to the Options Tab (below).



Aug ATM is priced at ~36 vol and Jul is priced at ~42 vol. I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis on this one but it's an interesting vol phenomenon, especially given the recent headlines out of Mexico.

This is trade analysis, not a recommendation.

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Gen-Probe (GPRO) - Depressed Earnings Vol to Front; Takeover/Not Takeover... Both?

GPRO is trading $69.91, up 1.1% with IV30™ down 2.8%. The LIVEVOL® Pro Summary is below.



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Gen-Probe Incorporated (Gen-Probe) is engaged in the development, manufacture and marketing molecular diagnostic products and services, which are used to diagnose human diseases, screen donated human blood, and ensures transplant compatibility.

I wrote about GPRO on 5-23-2011. You can read that post here:
Gen-Probe (GPRO) - Elevated Vol on Takeover Bids, Earnings Gaps and Calendar Spreads

The impetus for the last post was the news:
---
From the post on 5-23-2011:
The stock gapped up on the last earnings on 4-28-11 going from $70.16 to $79.61. Then, a few days ago (5-18-2011), the stock gapped up more than $7 on a bidding war for the stock. In a twenty calendar day period, the stock went from ~70 to over $86.
---

We can see the stock is now back around $70 -- so a whole lot of movin', but not a big change in the underlying. The most recent drop came on 6-6-2011. Here's the news from WSJ.com, written by a friend of mine -- Brendan Conway:

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Gen-Probe Inc. takeover speculators got crushed in the options market Monday, as new doubts arose that the medical-diagnostics company will be acquired.

Traders closed out bullish positions in call options granting the right to buy the San Diego firm's stock while others scooped up those options for a fraction of their previous value as prices sank Monday. The action comes after The Wall Street Journal reported that most potential suitors have dropped out of the bidding for the company.
Source: As Gen-Probe Suitors Pull Out, So Do Options Traders
---

So there you have it... Buy 'em, no, just kidding...

The stock came up on the same real-time custom scan for calendar spreads between the front two months. This time however, the back month has an earnings report.

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 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 and both months show a parabolic skew, reflecting both upside and downside risk. The ATM vol diff is ~9 vol points, or, said differently, Jul vol is ~ 23%higher than Aug vol with earnings.

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).



On the vol side we can see the IV30™ is in between the long-term historical trend in realized vol (HV180) and the short-term trend (HV20). HV10 is just 22.92 -- so the stock has found a quiet time for last couple of weeks.
Specifically:

IV30™: 43.77
HV10: 22.92
HV20: 52.84
HV180: 30.36

This stock can gap, but it's quiet time now -- or at least, it has been.

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



Potential Trades to Analyze
Last time this showed up on the calendar spread scan, selling the gamma (front month) was not good news. It feels like relatively similar risk, the front month last time was priced at ~50 as well, though the back month was 43 vol as opposed to 41 this time... and there weren't earnings embedded in the back.

1. ATM calendar spread
The Jul/Aug ATM calendar straddle sells ~ 9 vol points higher than it purchases and still allows for ~$5.50 move away (up or down) from $70 for the front month short straddle.

2. OTM calendar spread
The Jul/Aug 65 put spread, or the Jul/Aug 75 call spread, both sell ~ 11 vol points higher than they purchase (so slightly elevated to the ATM vol diff) while taking on a delta bet.

This is trade analysis, not a recommendation.

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American Tower (AMT) - Call Buyers

AMT is trading $53.30, up 1.9% with IV30™ up 7.9%. The LIVEVOL® Pro Summary is below.



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American Tower Corporation is a holding company. It is a wireless and broadcast communications infrastructure company that owns, operates and develops communications sites.

The company has traded over 11,000 contracts on total daily average option volume of just 3,321. Calls have traded on a 36:1 ratio to puts. The action is in the Jul and Aug 52.5 calls where combined over 9,000 have traded -- substantially purchases on both lines. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls in Aug are opening (compare OI to trade size). While Jul is ambiguous, I believe the Jul existing OI is long.  The stock volume thus far is just ~1.3 million on daily average of 3.3 million, so these feel like naked call purchases.



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. I would have expected the 52.5 line to bump up on the order flow -- at least in Jul.

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).



The implied is still below the HV20 though it has now popped over the HV180.

Possible Trades to Analyze
This is strictly order flow given that the skew is "normal" and the vol is "fair." If you're a believer in the flow, then perhaps owning deltas is the right move. If you're a seller of order flow, then perhaps offering the calls gets some edge.

This is trade analysis, not a recommendation.

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