OmniVision Tech (OVTI) - Vol Diff Opens to Calendar

OVTI is trading $16.42, up 3.5% with IV30™ down 3.9%. The LIVEVOL® Pro Summary is below.



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OmniVision Technologies, Inc. (OmniVision), incorporated in May 1995, designs, develops and markets semiconductor image-sensor devices.

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 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 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).



Two things that I noted:
1. The stock gapped down on the last earnings.
2. The IV30™ at ~88 looks pretty fair to the short-term and long-term historical vols. Specifically:

IV30™: 87.96
HV20: 101.42
HV180: 83.99

A vol sale over 105 or a purchase below 80 start to become interesting even without a calendar spread.

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. It's also interesting to see the upside is bid in Oct to both the ATM and downside leaving an even larger vol diff to the upside between Oct and Nov... Hmmm...

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



Potential Trades to Analyze
OVTI stock has a 52 wk range of [$12.60, $37.05]

1. Calendar spread mania
Upside, downside, diagonal and ATM are all worth exmaining in this stock, with vol diffs as high as 25 vol points opening up between the front two months.

This is trade analysis, not a recommendation.

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Comtech Telecomm (CMTL) - Vol Explodes 50%, Options Trade 45x Average Volume

CMTL is trading $31.08, up 10.2% with IV30™ exploding up 49.5%. The LIVEVOL® Pro Summary is below.



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Comtech Telecommunications Corp. (Comtech) designs, develops and markets products, systems and services for communications solutions. The Company operates in three segments: telecommunications transmission, mobile data communications and radio frequency (RF) microwave amplifiers.

The news pushing the stock and vol is summarized below from a Bloomberg article:

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Comtech Telecommunications Corp. (CMTL) rallied 7.5 percent to $30.32 after jumping 7.8 percent, the most intraday since Jan. 26. The communications equipment maker is attracting potential takeover interest from several government contractors, according a report by Reuters, which cited people familiar with the situation.
Bloomberg: Comtech, Constellation Brands, Express Scripts, Yahoo: U.S. Equity Movers, written by Lu Wang.
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The vol pop is astounding.  As the options for this firm have been priced as low as 25.89 in IV30™. The company has traded 21,726 contracts on total daily average option volume of just 473, or 45x the daily average. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates the action. The Oct 27.5 puts are the most active line trading more than 4,000x on OI of 4,125, then the Nov 30 calls, trading more than 3,800x on OI of just 1,346. The puts might be closing given the trade size to OI. The largest orders in the calls look like purchases to me on a small relative OI.



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



The front is elevated to the back, but most noticeably, check out that vol diff in the upside calls -- that's ~13 vol points, or said differently, the Oct upside is about 26% more expensive than the Nov (in terms of 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).



The data points today are the story -- vol exploded on this news as the stock popped about 10%.

Possible Trades to Analyze
While the Oct/Nov 30 or 32.5 c/s or diagonal c/s seems sorta... obvious, I would note that the stock has popped on what may turn out to be totally unfounded rumors and that back month upside vega, even at a discount to Oct, could get smacked. Then again... Selling Oct at 70% (in dollars) of Nov for options that expire in six trading days [CORRECTION: Eleven Trading Days] while owning a full month might seem tasty.

This is trade analysis, not a recommendation.

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McDermott Int'l (MDR) - Stock Pops Again, Vol Rises, Skew Turns

MDR is trading $14.26, up 6.8% with IV30™ up 13.2% as of ~11:35am EST. The LIVEVOL® Pro Summary is below.



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

I wrote abut MDR just a few days ago, on 10-3-2011. You can read that post here:
McDermott (MDR) - Rising Stock and Rising Vol; Earnings Approaching


At the time, the stock was trading $11.26 with IV30™ at 82.07. The trend has continued. The vol and stock are still exploding with the action to the upside in the order flow – OTM calls are the flavor. Over 28,000 contracts have traded in the first two hours on daily average volume of just 3,870. Calls have traded on a 5.7:1 ratio to puts. Yesterday 17,288 options traded with calls trading on a 5.9:1 ratio to puts. The Stats Tab snap from today as well as the day’s biggest trades are included below.





Let’s turn to the Options Tab and check out the lines with the volume.



We can see the Oct 15 calls have traded over 10,000x on OI of less than 5,000. Let’s turn to the Skew Tab to examine the line-by-line vols and the monthly term structure.



Two things that pop out:
1. The front is substantially elevated to the back with Oct vol priced at 146 (up 19 vol points today) and Nov priced at 118 (up 14 vol points today). Yesterday Oct vol was up ~10 vol points and Nov was up ~5 vol points.

2. The upside skew in Oct is bid, or in English, the upside calls are priced to higher vol than the ATM and OTM downside. The order flow is in the calls, it’s substantially purchases and that flow is driving the price (vol) of the options up.

Note that MDR earnings are in Nov, not Oct and the stock has a history of gapping on earnings – so that earnings vol in Nov is valuable.

Finally, 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 the stock rise over the last two days and the corresponding vol increase... Yeah, vol increase with stock rise.

I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. I will say that owning the Nov vol (with an earnings cycle) for less than the Oct vol seems like a reasonable position to analyze. I also like the idea of a diagonal, owning a lower strike call in Nov to a higher strike in Oct.

FULL DISCLOSURE: In fact, I put that trade on yesterday. But, today that spread costs more than the difference in the strikes (more than $1). Yesterday that trade costs me $0.75 – today, I actually closed. Today, obviously, I'm less enthused about an open...

This is trade analysis, not a recommendation.

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Research in Motion (RIMM) - Vol Hits New High, Skew Turns to Takeover Rumors

RIMM is trading $23.53, up 12.1% with IV30™ up 18.2%. The LIVEVOL® Pro Summary is below.



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Research In Motion Limited (RIM) is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market. RIM provides platforms and solutions for access to information, including e-mail, voice, instant messaging, short message service (SMS), Internet and intranet-based applications and browsing.

The stock has been plummeting of late, with a legitimate worry as to the relevancy of the company's existing products moving forward. I found this stock using a custom scan searching for names where IV30™ is up at least 10% on the day. The news driving the vol today seems to surround takeover rumors. Here's a snippet from a CNBC news story:

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Speculation that Research In Motion could be a takeover target caused shares of the BlackBerry maker to soar on Wednesday.

[...]

HTC, Microsoft and Vodafone are among the companies rumored to be looking at RIM as a possible takeout target, options trader Jon Najarian said from the Chicago Mercantile Exchange.
Source: Pros Weigh Research In Motion Takeover Talk
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Well there you go... 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 RIMM 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).



At the end of April this was a $56 stock. It's trading in the low 20's as of this writing. Through all of that, the IV30™ never closed above 90 (52 wk high is 89.08). With the pop today, RIMM IV30™ is now in the mid 90's and is above the short-term (and long-term) realized vol.

IV30™: 94.92
HV20: 84.05
HV180: 62.75

It is interesting to note that the HV180 has risen from ~37 to now in the 60's.

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



Keep in mind that the red curve represents the weekly options (expiring in two days and an hour). The upside is bid in both the Oct weekly and Oct monthly expos -- the option market reflects the upside potential in the underlying. I've included a snapshot of the Oct monthly expo skew chart as of 9-12-2011 -- we can see the upside vol was not as bid as it is today (compare to yellow curve above).



Finally, let's turn to the Options Tab.



Possible Trades to Analyze
1. With the vol elevated on rumors of upside moves (a takeover), one way to examine this vol is to analyze a downside put sale, either naked, in a vertical, in a calendar or in a diagonal. Taken a step further, a ratio spread inter or intra month seems like a reasonable position to examine. The 52 wk range for RIMM is [$19.29, $70.54].

2. Similarly, an upside vol sale covered with options or stock is a potential position to analyze. Naked upside feels a touch icky given that this was a $70 stock less than a year ago, but ya know... The upside is bid, so the vol is elevated, so...

This is trade analysis, not a recommendation.

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Northern OIL (NOG) - Depressed Earnings Vol on Earnings Mover

NOG is trading $20.21, down 2.6% with IV30™ up 2,6% as of ~11:15am EST. The LIVEVOL® Pro Summary is below.



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Northern Oil and Gas, Inc. (Northern) is an independent energy company engaged in the acquisition, exploration, exploitation and development of crude oil and natural gas properties.

The Oil and Gas equity world has been on a bit of a roller coaster of late, with rising vol and increased realized stock movement. NOG poses an interesting opportunity through a calendar spread with a twist – earnings are due out in the Nov expo cycle.

Let’s start with the Charts Tab to get a feel for the recent stock and vol movement before we look to the term structure. The top portion is the stock price, the bottom is the vol (IV30™- red vs HV20 - blue vs HV180 - pink).



The one phenomenon that stands out to me is that gap in HV20 – which, of course, simply reflects a gap in the stock price. Here is the stock price evolution over a three day period in August:

8-5-2011: $18.16
8-8-2011: $13.25
8-9-2011: $18.52

That 40% pop was off of the earnings release – keep that in mind… Let’s turn to the Skew Tab to examine month-to-month and line-by-line vols.



The last two earnings cycles for NOG at this time of year were 10-26-2009 and 11-8-2010. The prior earnings release in 2010 was 8-9-2010 and this year they released on that same date (8-9-2011). In English, it’s a reasonable bet that the next earnings release will be in the Nov options cycle and outside of the Oct cycle. Given the massive movement from earnings in the Aug 2011 earnings release, owning that vol while funding it with a sale of elevated vol in Oct, seems... interesting?...

Let’s turn to the Options Tab for completeness.



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. But, owning that Nov vega with a sale of Oct, seems interesting. The biggest risk IMO is the short gamma in Oct -- meaning perhaps OTM or diagonal calendars are one way to examine this vol phenomenon while addressing the gamma risk.

This is trade analysis, not a recommendation.

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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:

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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:

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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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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:

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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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