Hollysys (HOLI) - Vol Explodes, Stock Drops... Why?...

HOLI is trading $8.10, down 7.1% with IV30™ exploding up 56.1%. The LIVEVOL® Pro Summary is below.



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Hollysys Automation Technologies Ltd. (Hollysys), formerly HLS Systems International, Ltd., is a provider of automation and control technologies and applications in the People’s Republic of China.

What's odd here is that I can't really find any news that's driving the stock drop or more notably, the vol rise.

The company has traded 8,066 contracts on total daily average option volume of just 249. The most active line has been the Jun 5 calls which have traded 2,915x and that flow looks like sellers, IMO. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the Jun 5 calls are mostly opening (compare OI to trade size). The Jun 7.5 calls have also traded on low OI -- I think those might actually be sales as well, but I can't tell given the market width at the time of the largest trade ($0.05 x $2.20).



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



We can see that the front month is elevated to the upside and flattish other than that. The back two months show something like a "normal" skew shape. The most noticeable phenomenon here is the vol difference between the months. The monthly vols are 183, 172, and 106 for Jun, Jul and Oct respectively.  This indicates elevated near-term risk relative to the back.

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's decline of late and the atmospheric IV30™ move today.

Possible Trades to Analyze
I've read some news that this is actually sort of common for the stock with respect to the price movement. That is, seemingly unmotivated moves occur, then pass. I dunno, but the stock's recent move down doesn't look "random" to me.

In terms of trades, I do note some interesting phenomena.
1. The Jun 17.5 calls are bid and the Jul 15 calls are not. Huh?... A Jul 15/Jun 17.5 call spread owning Jul and deltas for even or a credit would be what they call a great trade. Hi, I'll take two of those please...

2. Similar spreads all around on both the call and put sides seem practically possible but likely realistically not. But, worth analyzing... When vol moves abruptly often times the spreads get out of whack and scalps or even arbs are possible.

This is trade analysis, not a recommendation.

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MAKO Surgical (MAKO) - Vol and Deltas After 'Sax' Upgrade

MAKO is trading $31.65, up 0.9% with IV30™ down 0.7% as of ~10am EST. The Livevol® Pro Summary is included below.



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MAKO Surgical Corp. (MAKO) is a medical device company that markets its advanced robotic arm solution and orthopedic implants for minimally invasive orthopedic knee procedures.

I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis, but this is a really cool one -- I do have a position in it.

The recent news in this stock has been all about a conviction upgrade from Goldy. Here’s a news snippet from The Motley Fool:

The medical upstart soared after being added to Goldman Sachs' "conviction buy" list. The analyst sees MAKO "in the early stages of its growth trajectory" despite a healthy run before the bullish note. As quoted on StreetInsider.com this morning, Goldman opined: "We see MAKO emerging as one of the most compelling growth stories in MedTech, with the potential to transform orthopedic surgery through the advent of robotic technologies.
Source: The Motely Fool

Today, the stock appeared 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 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 Skew Tab (below) to see the month-to-month and line-by-line vols.



The skew shapes are nearly identical – there’s a consistent eight point (ish) vol elevation in the front (red) to the back (yellow).

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



We can see how quickly the stock price has risen off of Goldy’s upgrade. The IV30™ has risen dramatically as well.

Let’s look to the Options Tab.



There are interesting trades to analyze wrt diagonals and straight calendars. An interesting question to roll around on your tongue is whether or not the Goldy upgrade after the recent stock move makes this company more or less likely (or unchanged) to move around a lot from here.

This is trade analysis, not a recommendation.

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International Game Technology (IGT) - Oct Calls Trading

IGT is trading $17.67, down 0.8% with IV30™ up 4.5%. The LIVEVOL® Pro Summary is below.



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International Game Technology (IGT) is a global gaming company specializing in the design, manufacture, and marketing of electronic gaming equipment and systems.

The company has traded over 9,200 contracts on total daily average option volume of just 1,567. All but 52 contracts have been calls yielding a 176:1 call:put ratio. The action has been in the Oct 17 and 18 calls with over 8,600 trading (combined), substantially purchases from what I see. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls in Oct are mostly opening (compare OI to volume). That existing 2,038 interest in the Oct 17 calls looks long to me (just an opinion) based on the volume on 4-20-2011.



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



The skew is pretty normal looking, but notice how the Oct vol (green) is above the front months (both Jun and Jul). There's a also a subtle vol difference that increases to the upside OTM calls.

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 up on earnings last cycle (4-21-2011) as IV30™ dipped on the vol crush. With today's rise, IV30™ is now just above HV180.

This is trade analysis, not a recommendation.

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Gen-Probe (GPRO) - Elevated Vol on Takeover Bids, Earnings Gaps and Calendar Spreads

GPRO is trading $80.92, down 1.2% with IV30™ down 8.6%. 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.

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. Since then, it's now down over $5 from the high.

Today, GPRO just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months. There's actually an interesting spread between all three months which made this one particularly interesting to me.

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) and want to avoid bio-techs (and their crazy vol).

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



Not only can we see the vol diff between the front two months (red and yellow), but also the vol diff between the front two and the third month (green). The next earnings release is due out in the end of Jul or beginning of Aug -- so the Aug options cycle. In English, the third month with earnings has by far the lowest vol right now for the front three.

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 gap up on earnings a few weeks ago and then again on 5-18-2011. IV30™ is substantially elevated to the long-term historical trend (HV180), as it should be considering the risk in the underlying. Specifically:

IV30™: 48.28
HV20™: 61.12
HV180™: 24.84

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



This is trade analysis, not a recommendation.

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GameStop (GME) - Vol Pops, Stock Rises, Calendar Opens

GME is trading $27.83, up 1.9% with IV30™ up 10.6%. The LIVEVOL® Pro Summary is below.



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GameStop Corp. (GameStop) is a retailer of video game products and personal computer (PC) entertainment software.

The company has traded over 23,000 contracts on total daily average option volume of just 6,989. Jun 28 calls have traded just under 7,500x. The largest trade was: GME jun 28 c cust paid up to .83 for 5K...crossed. Color from my good friend Mike Bristow of V-trader Group. Sup, Mike? The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the Jun 28 calls and puts are mostly opening (compare OI to trade size). When looking down the option chain for GME, I don't see any OI larger than 5,500 until we get to the '12 options, so this trade is large.



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



We can see those May 28 calls are still bid from the price movement today -- those are 2.5 hour options -- pure gamma. I've also included the GME skew tab with May taken out so we can see the Jun/Jul diff.



We can more clearly see the vol diff between the Jun and Jul 28 lines here, with May taken out. FULL DISCLOSURE: I am short the May 28 calls and long the Jul 28 calls. The positions will obviously change soon, but as of this writing, that's what I hold. Please DO NOT TAKE that as advice. Prices have changed from my trades, anyway.

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 climbed after an initial ugly drop off of earnings. Today it's popping again with the IV30™ super elevated relative to both the short-term and long-term historical vols (HV20 and HV180). Actually, for the last several months, the implied has tended to trade above the historical -- so the real question is, why am I long vega?... Lol...

This is trade analysis, not a recommendation.

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Crude Oil ETN (OIL) - Skew and Vol -- What's Next?

OIL is trading $25.19, down 2.2% with IV30™ down 3.4%. The LIVEVOL® Pro Summary is below.



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The investment is linked to the performance of the Goldman Sachs Crude Oil Return index and reflects the returns that are potentially available through an unleveraged investment in the futures contacts comprising the index plus the Treasury bill rate of interest that could be earned on funds committed to the trading of the underlying contracts.
Source: Yahoo! Finance

The ETF has some great skew and given the vol of late, I wanted to write about it. Let's start with order flow. The ETN has traded just under 6,000 contracts on total daily average option volume of just 1,602. Jun 28 calls show a lot of the action with over 3,400 traded in the first hour (ish) and the Sep 28 calls have traded over 2,000x. Both of these lines look like sales are the substantial order flow. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that there is an existing OI of over 2,800 in the Jun 28 calls. I believe that OI is long and it opened substantially on 5-18-2011 (i.e. two days ago) for ~$0.50. The sales today are at ~$0.30.



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



What a great skew. Commodities can tend to have a parabolic skew as the "norm," unlike most equities. OIL has the parabolic shape but there is a 'V' shaped dip on the 26 line which makes it quite interesting to you skew junkies (eh hem... me)... The OTM upside is more expenive (in vol) than the OTM downside, so the option market does reflect slightly higher upside risk than downside.

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).



Oil has plummeted of late as have many commodities. There was that volatile period from 5-2-11 to 5-5-2011 when the ETN dropped about 13%. During that same period, the IV30™ popped ~ 5 vol points or ~15%. As of right now, the IV30™ (35.83) sits squarely in between the short-term historical vol (HV20 is 46.35) and the long-term historical vol (HV180 is 30.61). The HV60 is 36.38, so vol feels about fairish based on those measures.

Possible Trades to Analyze
1. Trade Jun skew:
The Jun 26 calls are priced at ~33.8 vol. The Jun 27, 28 and 29 calls are priced at ~38.4, 40.7 and 39.6 vol, respectively. Hypothetically the Jun 26/28 call spread can be bought for $0.40 yielding a 4:1 MaxGain:MaxLoss and selling ~7 vol points higher than purchased. That's just one example -- obviously, this carries a delta.

2. Other vol trades to examine:
The decision really comes down to betting on either that the short-term HV is elevated (and will decline) and therefore IV30™ may be pricey, or the opposite -- that we're in for more ragged moves in OIL and the implied is too cheap. I know, that last bit that was soooo helpful...

This is trade analysis, not a recommendation.

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CBOE Holdings (CBOE) - Jun Skew Shaped to Trade

CBOE is trading $28.27, up 1.5% with IV30™ down 0.3%. The LIVEVOL® Pro Summary is below.



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CBOE Holdings, Inc. (CBOE Holdings) is one of the options exchanges in the United States.

I wrote about this one for TheStreet.com, so no specific trade analysis, but it's still an interesting vol story, particularly the shape of the vol curve in Jun. Let’s look at the Skew Tab from Livevol® Pro to examine the strike-by-strike vols.



The ATM vol is the lowest in the month with an increasing skew to the downside (which is normal) and an increasing skew to the upside (which is not as normal).

Let’s look to the Charts Tab (below) to analyze the vol level relative to historical. 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's recent rise out of earnings. Interestingly, at the same time, the IV30™ has increased to the point where it’s now trading above both the short-term and long-term historical vols (HV20 and HV180, respectively). Specifically:

IV30™: 34.21
HV20: 18.10
HV180: 30.09

So the vol difference between the implied and historical is significant. Or, in Engish, owning naked vol here is expensive relative to where it has been.  Let’s turn to the Options Tab.



The options are priced to the ATM for back spreaders (option owners) and to the OTM or front spreaders (option sellers). The uptrend in the stock has made the upside bid and the downside is bid just due to normal skew phenomenon. You can read about that here: Understanding Option Skew.

This is trade analysis, not a recommendation.

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Unisys Corp (UIS) - Depressed Vol and Post Earnings Pattern

UIS is trading $27.93, down 0.8% with IV30™ up 0.6%. The LIVEVOL® Pro Summary is below.



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

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

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



The goal with this scan is to identify short-term implied vol (IV30™) that is depressed both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume) and want to avoid bio-techs (and their crazy vol).

The UIS 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™: 37.42
HV20: 63.31
HV180: 53.50

So, IV30™ is depressed relative to the short-term and long-term realized movement of the stock. There is an interesting trend there -- two cycles ago the stock gapped on earnings as well, the HV20 jumped (obviously), but the stock movement after that pop continued and the HV20 actually increased for a month (ish) after.

That same pattern is developing now -- even though the HV20 popped on the earnings move, it has increased slightly in the following weeks. Last time, the IV30™ eventually traded well above the HV20 -- we'll see if that's the case this time -- if it is, vol is likely not a purchase.

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



The shape of the skew is normal -- quite pretty really. I do note that Jun vol is below Jul vol.

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



Possible Trades to Analyze
1. Purchase Jun vol:
The ATM straddle is priced at ~37 vol as is the ATM strangle. The downside wings are priced at higher vol as is the upside for the 31 and 32 strikes (see skew chart). A purchase of the meat and sale of the wings is a possible trade worth examining -- perhaps even on a ratio to the downside.

2. Opposite:
If UIS stock follows the same pattern it did after the large move on earnings two cycles ago, vol might actually be a sale.

This is trade analysis, not a recommendation.

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