Tuesday, December 18, 2012

Level 3 Comm (LVLT) - Calls Trade, Stock Spikes, But Vol Remains Depressed

LVLT is trading $23.17, up 6.7% with IV30™ up 12.8%. The LIVEVOL® Pro Summary is below.


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Level 3 Communications, Inc. (Level 3) is a facilities-based provider of a range of integrated communications services.

This is a vol and stock note along with some order flow.  Ultimately it's the recent move in the stock and the lack of a move in the vol that caught my eye.  More on that in a sec...

The company has traded over 17,000 contracts on total daily average option volume of just 1,278. Calls have traded on a 5:1 ratio to puts with the largest trades amounting to a Jan 22/Mar 24 call spread -- although I'm not sure the legs traded together. The Stats Tab and Today's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that both the Jan 22 and Mar 24 calls are mostly opening (compare OI to trade size). Across the top I also note the vol increases by expiry, with Dec showing the largest rise on the day.

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

On the stock side we can see that abrupt upswing reversal since late Nov. On 11-27-2012 the stock closed at $18.19, so as of this writing it's up 27.4% in less than a month. The 52 wk range in stock price for LVLT is [$16.36, $27.99].

What really caught my eye in this name is the vol chart. I have included the one-year IV30™ chart below.

We can see that while the implied is popping today, it's still low relative to its own annual history. The 52 wk range in IV30™ is [36.05%, 60.07%], putting the current level in just the 21st percentile. I dunno, with a stock move up that abruptly in such a short period of time and large call spreads trading, at the very least an examination of the vol levels may be worthwhile.

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