Pandora (P) - Vol Pops to All-time High as Stock Dips

P is trading $11.88, down 11.0% with IV30™ up 7.9%. The LIVEVOL® Pro Summary is below.



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Pandora Media, Inc. (Pandora) is an Internet radio in the United States. As of January 31, 2011, it had over 80 million registered users. The Music Genome Project and its playlist generating algorithms enable it to deliver personalized radio to its listeners.

P has hit an all-time high in IV30™ today. I found it by using a custom scan that searches for names where IV30™ is up at least 10% on the day. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.



The P 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).



It's interesting to note that P implied vol tends to trade above the short-term historical realized vol. As of today however, that vol difference has reached a new high. Specifically:

IV30™: 128.15
HV20: 90.51

We can see the stock had been rising several days in a row, going from $10.05 (9-22-2011) to $14.65 (9-30-2011), or 46% in eight calendar days. The stock has since dropped nearly 20% in the last two trading days. In English, yeah, you can make an argument that the vol should be elevated.

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



The skew shape for both front two months looks "normal." What we can see is that the front month (red line) is elevated to the second (yellow). Oct vol is priced at 136.70 (up 10.8 vol points today) with Nov priced at 123.11 (up 8.1 vol points today).

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




Possible Trades to Analyze
P has been bouncing around and does tend to move in trends -- up several days or down. The 52 wk range is [$9.33, $26.00].

Prior to today, the IV30™ high was 121.63.

1. Sell downside in Oct
a. With Oct elevated to Nov, and the IV30™ at a new all-time high, one position to examine could be selling the downside puts. Keeping in mind the all-time low for the stock is $9.33, perhaps selling the Oct 8 or 9 puts is one to analyze.

b. A different twist to (a) could be a 1x2 put spread -- like buying the Oct 10 puts and selling the Oct 9 puts on a 2:1 ratio. This reduces the net premium received, but allows for some downside movement in the stock to be captured in the put spread, before getting naked short downside risk.

2. Sell delta neut vol
Selling the ATM straddle or strangles and covering with further OTM strangles seems like a reasonable position to analyze; just recall that the vol is elevated for good reason, the stock has moved huge of late.

This is trade analysis, not a recommendation.

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Interoil (IOC) - Exploding Vol in Dipping Stock

IOC is trading $32.50, down 17.2% with IV30™ up 9.4% as of ~ 11:15am EST. The LIVEVOL® Pro Summary is below.



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InterOil Corporation (InterOil) is an integrated energy company operating in Papua New Guinea and its surrounding Southwest Pacific region.

The news driving the company surrounds a new contract. Here is a news snippet to summarize:

---
The company has planned an LNG project in Papua New Guinea, which gives it access to the hungry energy markets of Asia. But last week, the country's energy minister suggested that InterOil might need to make major changes to the project, causing shares to plummet. With the government seeking a larger facility than InterOil planned, the company could have trouble getting financing.
Source: The Motley Fool
---

IOC has hired Morgan Stanely, Macquarie Capital and UBS to help find an investing partner in the Papua New Guineas project according to Reuters.

Let’s 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 that IOC was a $60.92 stock as of 9-20-2011 with IV30™ at 71.21. As of this writing, IOC is down to $32.50 (down 54%) with IV30™ up to 162.30 (up 128%). Or in English, the news has been bad and the risk is significantly elevated even at these stock price levels.

Let’s turn to the Skew Tab to examine the line-by-line and month-to-month vols.



We can pretty easily see two phenomena, here:

1. The front month is elevated to the back across all strikes. The last two earnings cycles at this time of year were 11-4-2009 and 11-15-2010, so it’s reasonable to assume that earnings for IOC will be in the Nov cycle and certainly outside of the Oct cycle. Given that the vol is elevated in Oct even with earnings vol embedded in Nov reflects the substantial (read: company valuation changing) impact of this new project for IOC.

2. The upside skew in Oct is bid relative to the ATM, unlike Nov. Or, again in English, the option market reflects substantive upside risk (potential) in the near-term as well given the stock’s collapse in the last two weeks. Having said that, most of those calls are $0.10 bid or lower, so the vol number may be a bit misleading.

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



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. Having said that, an interesting position to examine could be collecting premium in the OTM downside vol in IOC. One view is that perhaps the news is out and the catastrophic downside is priced to fear rather than reality. Ratio put spreads could be an interesting position to analyze. Or not?...

This is trade analysis, not a recommendation.

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Bank of America (BAC) - Follow Up: The Odds of the Largest Bankruptcy... Ever...

BAC is trading $5.64, down 7.9% with IV30™ up 22.3%. The LIVEVOL® Pro Summary is below.



I last wrote about BAC on 8-8-2011 and caught a bit of an s* storm for it. You can read that apparently provocative post here:
Bank of America (BAC) - The Odds of the Largest Bankruptcy... Ever...

BAC was trading $6.52 at the time with IV30™ at 151.75. Here's a snippet of the article:

---
BAC is interesting in that if I look at it and am totally agnostic to the company, the vol and stock movement look like a bankruptcy stock. Of course, considering it's the largest bank in the world (or whatever), all of a sudden I feel ridiculous saying that. Let's take a look at some data.

[...]

Here's where it gets quite interesting. In the options world, a very rough estimate of a company's bankruptcy risk is to take the lowest strike puts (as long as they are below $5 in strike), and calc the MaxGain (in % terms). Subtract that number from one, and that gives you a bankruptcy probability (sort of).
---

Let's look 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).



Sort of echoing the sentiment from the last post about BAC, that stock chart simply looks like a company that has a non-trivial chance of bankruptcy. The vol may not reach the prior highs, but one more reputable story about what the "catastrophic news" could be, and I'm betting we could see 200+ vol in BAC.

Looking to the Skew Tab, below we see a frighteningly normal skew.



Why frightening? Because no one is offering those crazy baby puts and pounding the vol. This is BAC ppl! I mean, the largest bank can't wipe out their shareholders, right? Wait?... What's the full name of this company? Bank of America Merrill Lynch Countrywide... What does the Countrywide part mean? For that matter, what does the Merrill Lynch part mean?

Finally, let's turn to the Options Tab and put some numbers to it.



We can see the Nov 2 puts are priced to ~ $0.065 fair value. Not shown here, but in the later months, the Jan 2013 1 puts are worth ~$0.165. Said simply, the option markets reflect ~16% probability that BAC goes bankrupt within 15 months. Yeah... a 1/6 chance. Using the Feb 2 puts, the option market reflects ~4% chance of bankruptcy within the next five months.

Keep in mind, both Countrywide and likely Merrill Lynch were going to suffocate and eliminate all shareholder value from a bankruptcy.  That risk didn't go away, it got swallowed up by BAC.  Take 2x bankruptcy risk within a firm which now faces its own potential risks.  Yeah... This is real.

However you slice it, there is one reality reflected by the option market, no matter how much you pound the table and say it can't happen.

Bottom line: There is a low, but non-trivial possibility that the stock of what once was the largest bank in the United States, simply goes away.

This is trade analysis, not a recommendation.

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Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

McDermott (MDR) - Rising Stock and Rising Vol; Earnings Approaching

MDR is trading $11.26, up 4.7% with IV30™ up 5.8%. The LIVEVOL® Pro Summary is below.



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McDermott International, Inc. (MII) is an engineering, procurement, construction and installation (EPCI) company.

This is an order flow note. The company has traded over 15,000 contracts in the first two hours on total daily average option volume of just 2,753. Calls have traded on a 24.6:1 ratio to puts with the action in the Nov 10 and 14 calls -- substantially purchases IMO. The Stats Tab and Day's biggest trades snapshots are included (below).





The news driving this company is... well... I dunno... The stock dipped hard on Friday based on some revised outlook comments from a competitor. That news snippet is included below from a Forbes article:

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Shares of Orion Marine Group (ORN) are plunging today after the heavy civil marine contractor updated its outlook late yesterday. Orion said during 2011, its end markets have experienced uncertain and tough times exacerbated by the inaction of the US Federal government to fund infrastructure programs such as a new highway bill and the Army Corps of Engineers budget.

[...]

Orion competes with companies like KBR and McDermott International.

Source: Orion Marine Group Shares Plunge on Outlook
---

The Options Tab (below) illustrates that both the Nov 10 and 14 calls are mostly opening (compare OI to trade size). With the vol up and most of the executions on the offer of at least dime wide markets, these look like purchases. When looking down the entire option chain for MDR, I only see one line with OI near 5,000, so both sides of these lines are very large for this company.



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



The skew shape is normal, with the downside strikes showing higher vol than the ATM and upside. The last two earnings cycles around this time for MDR have been 9-9-2011 and 9-8-2010 with prior cycles on or around 8-9. Given that MDR released earnings on 8-3-2011, it's reasonable to assume that the next earnings cycle will be in the Nov options expo cycle (and outside of Oct). Right now we can see the two months essentially lie on top of each other in terms of vol, so, ya know...

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 massive stock drop on 8-4-2011. Here's a quick summary of that move from The Motley Fool:

---
What: Shares of oil and gas infrastructure service provider McDermott International (NYSE: MDR ) fell nearly 27% after reporting lower-than-expected profits.

So what: Revenue rose 35% to $849.8 million, beating estimates, but a 30% decline in Middle East sales took a toll on profits. Earnings came in at $0.27 a share, a sharp decline from last year's $0.34 and five cents below analysts' consensus projection.

Source: McDermott International Shares Plunged: What You Need to Know, written by Tim Beyers.
---

Interesting that the vol is up today again though the stock is rising.

Possible Trades to Analyze
The vol in Nov (earnings) isn't elevated to Oct, which at first blush is pretty weird given that the stock dropped almost 30% on the last earnings cycle. But, check out this stat:

IV30™ was just 48.28 before the last earnings cycle and actually rose to slightly over 60 after the release (as a result of the stock drop). As of right now, both Oct and Nov are priced at slightly over 80 vol. If looking to that non-existent vol diff between Oct (non-earnings) and Nov (earnings), it feels like Oct might be more elevated than Nov is depressed. i.e. owning vega on 80 (ish) vol is... ya know... high (ish), no? Just sayin'...

This is trade analysis, not a recommendation.

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Home Depot (HD) - Elevated Vol

HD is trading $33.08, down 2.1% with IV30™ up 3.4%. The LIVEVOL® Pro Summary is included below.



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The Home Depot, Inc. (The Home Depot) is a home improvement retailer. The Home Depot stores sells an assortment of building materials, home improvement and lawn and garden products and provide a number of services.

I found HD using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20 LTE 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 HD 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 stock dropped from $36.39 on 7-26-2011 all the way to a low of $28.13 on 8-9-2011 or 22.3% in a two week period in what was a 24.55 vol stock (that's an annualized vol number). Since then the stock has recovered to now in the low 30's.

On the vol side, we can see the IV30™ is now just under 40 (38.18) while the short-term and long-term realized vols are depressed to that level as the stock has found a bit of a quiet period (at least compared to that abrupt two week period). It's this relative quiet time of late that has created the vol diff between implied and realized. Specifically:

We can see:
IV30™: 38.18
HV20: 27.30
HV180: 25.98

The next earnings release for HD should be at the end of the Nov options cycle (or after).

Let's turn to the Skew Tab, below, to examine the month-to-month and line-by-line vols.



The skew doesn't show any kinks from one-sided order flow and the term structure itself is normally shaped. Note that the red curve represents the Oct 7 weekly options.

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



Possible Trades to Analyze
Selling the ATM meat and covering with the wings is a reasonable way to examine the elevated vol. Alternatively, the 52 wk range for HD is [$27.92, $38.54], selling the downside on a ratio with some space between the long and short strikes might be interesting as well.

This is trade analysis, not a recommendation.

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EU and US Financials - Vols and Risk Starting to Decouple?

Let's examine the largest US banks against their European counterparts, using BAC and C for the US proxies, and DB and UBS as the European proxies. We'll note an interesting divergence that is developing as the market is finally reflecting differing risk between the two. The LIVEVOL® Pro Summaries are included below.









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For quite sometime, there was a compelling argument that the EU and US were essentially trading in tandem -- with news from one moving news in the other and a two way causality. From the Summaries above, we can see similar vols, so that similarity in risk premium seems relatively stable, but, one thing has changed -- and quite significantly.

Let's look to the vol charts for these four firms -- these are two year IV30™ charts.









Ok, so, what are we looking at?...

First, the similarities:
For all four charts, the implied is substantially elevated right now relative to the last two years, in some cases nearly triple the values from the past.

For the top two charts (US banks), we can see that the IV30 has come down off of highs. Specifically:

BAC is 40% off of it's IV30™ high
C is 26% off of it's IV30™ high

For the bottom two charts (EU), the banks are at or near highs -- in the case of UBS, making a new high today.

DB is 10% off of it's IV30™ high
UBS is 0% off of it's IV30™ high (a new high today)

Not convinced of the diverging behavior, yet? Try this. The EU banks are actually showing realized vol in line (actually above) the implied. In other words, the option market reflected risk is pacing the actual movement of the stock almost perfectly. In the US, the stocks are actually moving with lower realized vol than the implied reflects. Specifically, the HV20/IV30™ ratios are:

BAC: 77%
C: 88%
---
DB: 103%
UBS: 102%

Just to show I'm not cherry picking -- here are the same ratios for WFC and CS:

WFC: 79%
CS: 133%

Same phenomenon. Using these two for the prior stat:

WFC is 27% off of it's IV30™ high
CS is 11% off of it's IV30™ high

Again, the same phenomenon as before, with US bank stocks further off of the IV30™ annual high than the EU stocks.

So what? It seems that the EU and it's "problems" are finally decoupling (slightly) from the US and its "problems." The causality is still two-sided, but the vol behavior (or risk as reflected by the option markets) is finally diverging. The EU is showing greater realized vol to implied while the implied makes new highs. The US is showing a dipping implied off of highs, which is still elevated to the realized movement of stock. Hmmm... What pair trades are now available?

This is trade analysis, not a recommendation.

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Focus Media (FMCN) - Is China A State Backed Accounting Fraud Epidemic?

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FMCN is trading $21.37, down 14.1% with IV30™ spiking up 33.9%. The LIVEVOL® Pro Summary is below.



Focus Media Holding Limited (Focus Media) operates an interactive digital media network. The Company offers interactive digital media platforms aimed at Chinese consumers.

I can't find any company specific news about this company today other than the generic Chinese systematic report from DOJ. Here's a news snippet from WSJ:

---
Chinese stocks are getting crushed today, partly because of a report that the US government’s investigation of their accounting is gaining some muscle power.

[...]

Many of these names have already been hammered on such concerns for several weeks now. Some of them have political risk at home to contend with, too, along with growing worries about the strength of China’s economy.
Source: Chinese Stocks Crushed on Report of DOJ Probe
---

For those of you new to this story, suffice it to say a number of Chinese stocks have had egregious fraud claims surrounding their accounting, including one in particular that threatened to not let Deloitte auditors leave the company premises with audit papers in hand. You can read more about that one here:
The Audacity of Chinese Frauds from The New York Times and written by FLOYD NORRIS.

IMHO, if there is a Chinese bubble, it has a risk of being several fold -- one is just a normal bubble, like we had. The other is an absolute unabashed outright government sponsored accounting fraud epidemic. Now, before we point fingers, need I remind us of... Enron, WorldCom, HealthSouth, Tyco, Global Crossing, Arthur Anderson, etc, etc.

Given that our NASDAQ fell ~70%, I would say that's possible in China as a catastrophic worst case. Yeah, 70%.  But it won't happen like the US, it will be drips and drabs surroundned by GDP growth slowing.

Let's start with the Skew Tab for FMCN (below).


We can see the front is elevated to the back. The ATM vol diff is ~5 points. To the downside it grows to over 25 vol points.

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 this was a $27.41 stock on close 9-27-2011 and as I'm writing this it's already down to $20.35. The vol has absolutely exploded from 58.13 on 9-27-2011 to now 98.46 as I'm writing, or ~ 70%.

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



Potential Trades to Analyze
So here's the deal with these guys -- some of the Chinese companies have been halted for multiple months -- that leaves option positions absolutely ambiguous. Having said that, I have dabbled in a few of these names (couldn't help but sell that vol) so, ya know... Buyer (or seller), beware, but the stocks are at the very least interesting to analyze.

This is trade analysis, not a recommendation.

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Petroleo Brasileiro (PBR) - Elevated Vol, Earnings Vol Comp and Skew Diff

PBR is trading $23.60, up 1.0% with IV30™ down 3.5%. The LIVEVOL® Pro Summary is included below.



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Petroleo Brasileiro SA Petrobras (Petrobras) is a Brazilian integrated oil and gas company. It operates in five segments: exploration and production; refining, commercialization and transport of oil and natural gas; petrochemicals; distribution of derivatives, electrical energy, biofuels and other renewable energy sources.

This is a giant, with a market cap over $150 billion. I found PBR using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol. Add an earnings vol twist, and this becomes a compelling story.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20 LTE 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 PBR 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 the stock has been cut in half over the last six months – that’s ~ $150 billion in market cap. On the vol side, we can see the implied is elevated to both short-term and long-term historical realized vols, and thus the scanner trigger. Specifically:

We can see:
IV30™: 50.94
HV20: 39.92
HV180: 39.40

Let's turn to the Skew Tab, below.



We can see the skew shape is normal, with the downside bid relative to the ATM and the upside strikes. I’ve highlighted the downside, where the front month vol is elevated to the back. Interestingly, the last two earnings cycle for PBR around this time of year were 11-13-2009 and 11-11-2010 with prior cycles on 8-14-2009 and 8-13-2010. This year, PBR released earnings on 8-15-2011, so it’s a reasonable guess that the next earnings cycle will be in the Nov options cycle (Nov 18 expiry).

In English, a stock that’s lost 50% over 6 months and earnings approaching has the possibility to own that earnings vol for less than the front month. On top of that, the implied is trading above the historical, making a vol sale even more… tricky…

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



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here, but note that the 52 wk range is [$22.52, $42.38], meaning that PBR is right at the low. Taking into account that range, the elevated vol relative to historical and the vol diff between the earnings and non-earnings month, some interesting positions to examine arise.

This is trade analysis, not a recommendation.

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Imperial Holdings (IFT) - Stock Falls 65%, Did Someone Know... Did Someone Cheat?

IFT is trading $2.27, down 64% with IV30™ up 110.9%. The LIVEVOL® Pro Summary is below.



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Imperial Holdings, Inc. (Imperial) is a specialty finance company with a focus on providing premium financing for individual life insurance policies issued by insurance companies and purchasing structured settlements backed by annuities issued by insurance companies or their affiliates.

Here's the news driving the stock price to the ground, provided by TheStreet.com.

---
[IFT] acknowledged late Tuesday it was served with a search warrant by the U.S. District Court of the Southern District of Florida, saying it fully cooperated with the exercise of the warrant.

Imperial further disclosed that both the company and certain employees, including its chairman and CEO Antony Mitchell, are being investigated by the District of New Hampshire, and that the probe relates to its life finance business.
Source: Imperial Holdings Sunk by Federal Probe, written by Michael Baron.
---

So, ok.. why does this matter?... How about this:

The company averages 34 puts traded a day with no single day greater than 125... ever... Until yesterday, when 1,948 puts traded. Specifically, the Oct 5, Nov 5 and Dec 5 puts traded 1,058, 422, and 210 times, respectively. That's 1,690 puts in the ATM strike. The Options Tab from the close of yesterday is included below.



Note the OI in those three lines (Dec isn't pictured): 0, 0, and... 0. Yup, zero open positions in any of those puts. The stock (and therefore options) halted midday, so the prices look crazy on close. Let's glance to the Options Tab today.



Of the 1,058 puts in the Oct 5 puts, it looks like 1,043 were purchases and 15 were sales (and thus 1,028 OI, today). The Dec 5 puts were entirely purchases, that's 210 bought, 0 (zero) sold. The Nov 5 puts look like all but ~50 were purchases. The prices paid in the Oct 5 puts were ~ $0.20. Those puts are worth ~$2.75 today. In English, that's ~1,000*100*($2.75 - $0.20) = $255,000 in a day in just those puts.

In an interesting article posted by the Palm Beach Post, we get a bit of the timing of the event:

---
Updated: 3:35 p.m. Tuesday, Sept. 27, 2011
Posted: 2:26 p.m. Tuesday, Sept. 27, 2011

BOCA RATON — FBI agents and Boca Raton police closed the offices of finance firm Imperial Holdings on Tuesday as they executed a search warrant.

On Tuesday afternoon, an empty U-Haul truck was backed up to the entrance of the company's headquarters at 701 Park of Commerce Blvd., apparently ready to be filled with documents.
Source: FBI, police raid Boca Raton financial firm, written by Jeff Ostrowski.
---

As for the company's reaction to the news, here's a quote from the Dow Jones story: "The specialty-finance company said the action came as a complete surprise and it fully cooperated with authorities."

The first wave of trades in IFT came at 11:32am EST. That seems a bit early... The halt was announced at ~1:32pm EST. Someone really had their ear(s) open to this enormous $133 million market cap company which averages 40 options traded a day and pounced, huh?... Or wait?...

This is trade analysis, not a recommendation.

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Deutsche Bank (DB) - Earnings Vol Comp; Implied Tracks Historical, But Should It?

DB is trading $36.84, down 1.1% with IV30™ up 2.0% as of ~11:25am EST. The LIVEVOL® Pro Summary is included below.



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Deutsche Bank AG is a global investment bank. The Company offers a variety of investment, financial and related products and services to private individuals, corporate entities and institutional clients around the world.

This is another example of a phenomenon that’s starting to become common in companies with earnings due out in the Nov cycle. Specifically, the front month (Oct) is elevated to the earnings month because of the elevated risk right now. DB gets an extra special risk premium for Oct as Germany is poised to make a decision about Greece very soon.

Let’s start with the Skew Tab, below.



The skew shape is perfectly normal, pretty even. The point here is simple – the Oct vols are priced above Nov without exception. The last two earnings cycles in Oct for DB have been 10-29-2009 and 10-27-2010. With Oct expo on 10-22-2011, a reasonable bet could be that this year the earnings cycle will also fall in the Nov cycle (and out of the Oct cycle).

Let’s 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).



I’ve highlighted the recent stock pop in DB. What’s different about DB than several of the other companies that show the month-to-month vol diff with Nov below Oct is that the implied has actually tracked the historical realized vol (short-term). In English, the implied has been priced perfectly to actual stock movement (rather than an elevated implied to historical).

Let’s turn to the Options Tab for completeness.



I wrote about this one for TheStreet.com (OptionsProfits) so no specific trade analysis here. I do think that a calendar spread owning earnings vol for less than non-earnings vol feels like a reasonable position to hold. But, if the vol was also elevated to the historical and a position could be initiated to sell vol; i.e. be net short options, that could also be interesting. The issue with DB, for me, is that the implied is actually pretty fairly priced to the HV20 and I’m not sure of the impact of the German decision on Greece and its impact on DB (if any). I’d rather see implied be elevated to account for the uncertainty...

This is trade analysis, not a recommendation.

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