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The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months. Since this is expo. week, I've done a little extra "analysis" to find something worth looking at, keep readin' for more details.
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), 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 (which is normal this close to expo). Note that is "normal" coming into expo., so we need a little extra push to analyze some trades.
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. We can see two relevant things:
1. The IV30™ is rising but is still below the HV180™ (long-term realized vol). It is above the HV20™, so for lack of a better term, buying the IV30™ right now is kind of "fair."
2. The yellow line I've added in there is the vol of the Nov 62.5 puts. We can see how elevated this is relative to the three vols in the chart.
Specifically:
IV30™: 37.80
HV20™: 32.08
HV180™: 41.46
Nov 62.5 puts: 50.80
This stock tends to gap on earnings, so we can see the psycho HV20™ pops and drops.
Finally, let's look to the Options Tab (below).
Potential Trades to Analyze
1. Sell the Nov 62.5 puts @ $0.70 and buy the Dec 62.5 puts for $2.30. Pay $1.60, sell 50 vol and purchase ~40 vol.
2. If you're bearish, do the Nov 62.5/ Dec 65 put spread and grab yourself some short deltas. On expo, you can sell the Dec 62.5 puts out if the Nov 62.5 work out (expire worthless (ish)).
3. Go crazy, do the Nov 62.5/ Dec 65 put spread, but sell 2 Nov. Yeah, I said it...
4. Sell the Nov. 62.5 puts naked... Not my fav...
This is trade analysis, not a recommendation.
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