Wednesday, May 12, 2010

Questar (STR) - Vol Pop with Stock Rise on Near-term Bet of Spin-off

STR is trading 48.18, up 3.4% with IV30™ up 6.1%. The LIVEVOL™ Pro Summary is below.

The company has traded over 11,500 options in the first hour on total daily average option volume of just 1,676. All but 379 contracts have been calls for a 29:1 call:put ratio. The largest trades have been the May 50 calls (purchases). The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates that the calls are opening - over 8,400 have traded on just 593 OI. You can also see the May 50's are priced at 37 vol as of this writing.

The Skew Tab (click to enlarge) is interesting.

While the vol is up in the stock - most of that is in the Jun options. The largest trade of the day (see trades snap above) is 3,386 May 50 calls purchased for 0.30 vs. 47.44 stock, or the equivalent of 39 vol. Again, right now the mid market value for the calls is 37. The upside skew isn't bending up at all, which is a little weird given the order flow.

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

You can see the gap up, then precipitous drop after recently. The $50 level was just barely crossed from below (52 wk. high is 52.5) and quickly re-crossed from above down to these levels. You can also see the vol is trailing the realized moves recently (blue line is above the red line on the bottom chart). With May expo in 1.5 weeks, this is an interesting bet.

The stock may be up on news that the Pinedale Basin in Wyoming (where the company does some exploration) is yielding very good results. That reference is Here.

There are also rumors of a potential spin-off which would be seen as a positive for shareholders - I get the sense this is the bet.

This is trade analysis, not a recommendation.

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