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I found this stock using a real-time custom scan. This one hunts for high vols.
Custom Scan Details
Stock Price >= $7 <= $70
IV30™ - HV20™ >= 10
HV180™ - IV30™ <= -8
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >=10 <=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.
HRB traded down on this news (source:Motley Fool):
The company just announced that it's buying smaller tax-preparation expert 2SS Holdings for $287 million in cash. Though the TacACT parent is expected to add $0.05 per share to H&R's bottom line right away, investors seem less than impressed by the move.
... And it obviously wasn't taken well. The company traded over 86,000 contracts on total daily average volume of just 6,973 yesterday. Over 76,000 puts traded, yielding a 7:1 put:call ratio. The Nov 10, 11 and 12 puts say nearly 33,000 contracts trade in aggregate. The Stats Tab and Day's Largest Trades snaps are included below.
Let's look to the Options Tab (below).
We can see the Nov 10 and 11 puts are substantially opening (compare trade volume to OI). Nov 12 is a bit tricky, but best I can tell the OI is long. I believe the trades in all three lines were mostly purchases. The IV30™ jumped 15 points or nearly 30% today. It was this jump that pushed it into the high vol scan results.
The HRB 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 yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.
We can see:
IV30™: ~66.31
HV20™: 55.27
HV180™: 38
So, IV30™ is elevated relative to the short term and long term realized movement of the stock.
Possible Trades to Analyze
1. Vol is elevated, but for good reason it seems. Naked straddle sale doesn't entice me. One simple approach is to do the Nov. 11/12 1 x 2 put spread, buy 1 Nov 12 put, sell 2 Nov 11 puts and receive ~$0.10. The 52 wk low for HRB is $11.98 and this trades loses if HRB goes below $10. Of course, another day like today and there you go.
2. Wait until Oct expires and take a look at the Dec options that will roll out. Dec should have an earnings cycle, maybe a calendar pops up. selling the front (which will be Nov then).
3. Finally, an odd ball. Even though this came up as a high vol scan, I'm not convinced that paying $2.15 in the Nov 12 straddle isn't a purchase against some expensive skew (like the Nov 10 puts. Maybe even sell 2 Nov 10 puts against the long straddle, leaving safe downside to ~$9.50 (yes that's a lazy calculation).
This is trade analysis, not a recommendation.
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