Monday, December 6, 2010

Cninsure (CISG) - Chinese Insurer Does What?

CISG is trading $17.00, up 1.3% with IV30™ down 6.5%. The LIVEVOL™ Pro Summary is below.

CNinsure Inc. (CNinsure) is an independent insurance intermediary company operating in China.  This one has a weird story.

What: Shares of Chinese insurance company CNinsure (Nasdaq: CISG) went on a crazy ride today shooting 11% higher in early trading before plummeting to down 5%.

So what: Shares bounced on news the company would be buying back $100 million of U.S. shares by June 30, but then the market got a little confused. Isn't this the same company that issued $115 million of shares just this past summer? Wasn't it supposed to use the cash for growth?

Now what: Operations look to be strong and shares popped just last week on news that the CEO and CFO would be buying shares, but something seems a little off with this company. At the risk of missing out on a growth story, I'm going to stay away from a company that looks confused about its cash needs. I've seen one too many Chinese companies with surprise announcements that bash the stock to take a chance on this one.

Source: The Motely Fool. Written by: Travis Hoium

So, yeah... Sell stock to raise money, but then, buy stock... You know, the self scalp.... Weird...

Let's look to the Charts Tab. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

We can see the stock gap down on high volume on 11-4-2010, then again on 12-2-2010. The vols have also exploded, with IV30™ going from 42.73 on 11-3, up to over 95 on 12-3 (one month later).

The Skew Tab snap (below) illustrates the vols by strike by month.

We can see the vol term structure pretty clearly here. The front month is well above the second month, and the the second is well above the third. Looking to the Options Tab we can see the exact vols.

We can see that Dec vol is ~7 points higher than Jan, while Jan vol is ~14 points higher than Apr.

Dec IV: 94.29
Jan IV: 87.74
Apr IV: 73.35

I actually posted a trade on this guy on (OptionsProfits) so I can't get into specific trade analysis, but generally there seem to be a lot of trades on the board either spreading month to month or doing some creative intra-month trades. The downside looks pretty expensive still as well.  Granted, the risk is apparently quite high.

This is trade analysis, not a recommendation.

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