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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.
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.
SOLR is trading active today. Over 5,400 contracts have changed hands on a daily average of just 1,124. All but 273 contracts have been calls, yielding an 18.8:1 call:put ratio. The Feb 10 calls have traded more than 4,500x. They feel like purchases as the vol in Feb is up 14 points or ~25%. The Stats Tab snapshot is included below.
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).
Only the 10 strike in Feb has a bid in the OTM options, so it appears as a dot, rather than a curve. Nonetheless, the vol difference between the months is large enough to take a look.
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. Check out how high IV30™ is relative to the short-term historical vol (HV20™). Specifically:
IV30™: 60.83
HV20™: 45.42
HV180™: 61.35
The stock has been "sleepy" of late, but the vol is popping, so the options market is reflecting not so "sleepy" movement.
Finally, let's look to the Options Tab (below).
Potential Trades to Analyze
1. Two-sided calendar spread:
Sell the Feb 10 straddle @ $1.05 (~68 vol)
Buy the Mar 10 straddle for $1.75 (~52 vol)
Pay $0.70 to own Mar vs. Feb.
2. One-sided calendar spread:
a. Buy the Feb/Mar 10 put spread for $0.35.
b. Buy the Feb/Mar 10 call spread for $0.35.
3. Skip the calendar just get long deltas - copy order flow:
Buy the Mar 10/12.5 call spread for $0.95.
This is trade analysis, not a recommendation.
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