Tuesday, January 19, 2010

Rubbermaid (NWL) - Reverse Skew on Takeover Rumor

NWL is trading 15.35. Note the IV30™ 16% increase. The LIVEVOL™ Pro Summary is below.

I found NWL from the "High Option Volume" scan (Scanner Tab). The company has traded over 14,500 options today in the first hour on total daily average option volume of 1,594. Further, 14,200 have been calls for a 42:1 call:put ratio. The Company Tab snapshot is below (click the image to enlarge).

The calls that are trading are: Mar 17.5, Feb 15, Feb 17.5, Jun 17.5 and Mar 15 in descending volume order. The Mar 17.5 have traded 9000+ times on less than 1000 OI (open interest) - those are opening orders. Almost all of the call volume has been purchases. The day's biggest trades and Options Tab snapshots are included below (click either image to enlarge).

Note the IV's in Feb and March.
Feb 15 (atm): 35
Feb 17.5: 40

Mar 15 (atm): 37.
Mar 17.5: 39.

This is a classic reverse skew when one line in particular is bid up. For a thorough discussion of reverse skew you can look to this prior blog: SOLF Reverse Skew Blog.

The simplistic March skew for just three strikes is included below. Note now that upside and downside are creating a smile (rather than a smirk).

The NWL Charts Tab snapshot is included below for reference.

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