-------------------------------------------------------------------
For a limited time we are offering a FREE real-time trial to Livevol Pro™ for non-professional traders. You can get your trial by following the directions here: Click for Free Trial Offer
-------------------------------------------------------------------
I wrote about YHOO last week. You can read that here:
Yahoo (YHOO) - Takeover Rumors Push Vol and Skew
My favorite trade in that blog:
Sell the Nov 17 calls @ 0.43 and buy 4 of the Nov 19 calls for a total of $0.40. This trade yields a little credit, and wins huge if YHOO is taken over for a premium over $20.
Today, I found this stock using a real-time custom scan. This one hunts for high vols.
Custom Scan Details
Stock Price >= $7 and <= $70
IV30™ - HV20™ >= 10
HV180™ - IV30™ >= -8
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >=10 and <=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 YHOO 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™: ~41.31
HV20™: 23.22
HV180™: 30.71
So, IV30™ is elevated relative to the short term and long term realized movement of the stock.
Let's look to the Options Tab (below).
Possible Trades to Analyze
1. Sell the Dec 17 straddle @ $1.69 (~41 vol). Beware the takeover talk and stock and vol moves whether or not it's realized if there is a rumor... again...
2. Do #1 above, but buy 1 Dec 18 call and 2 Dec 19 calls. That yields a $1.69 sale and a $0.86 purchase or a net credit of $0.83, safe to upside if there's a takeover at a reasonable premium while still collecting premium. This is naked downside.
3. Do #2 above, but buy a Dec 15 put for $0.21. This yields a $0.65 credit but lowers downside risk and margin requirements. At this point, this is less about selling vol and more about creating a nifty spread.
This is trade analysis, not a recommendation.
Follow Live Trades and Order Flow on Twitter: @Livevol_Pro
Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html
No comments:
Post a Comment