Wednesday, December 22, 2010

Janus Capital (JNS) - Calls Trade, Vol Explodes

JNS closed at $12.73 yesterday, up 3.4% with IV30™ exploding up 47.8%. The LIVEVOL™ Pro Summary is below.

The company traded 7,970 contracts on total daily average option volume of just 374. Calls traded 7,478 times yielding a 15:1 call:put ratio. The action was in the Jan 13 calls which went up 5,745 times. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size). When looking down the entire option chain for JNS, I don't see any OI larger than 400, so the size of this trade is very large.

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

Very cool here, how the Jan 13 line spiked up but the Feb 13 line did not, nor did the Jan 14 line. This was a moment (or several minutes) of price discovery where a number of interesting trades were possible. But, if you look at the Options Tab, the Feb 13 vol spiked a I was taking screen shots - it's actually above the Jan 13 line... damn, missed that one.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Just a note that we can see how depressed IV30™ was and how much it popped yesterday.

Possible Trades to Analyze
1. Well, the Jan/Feb 13 call spread would have been nice if we could have taken advantage of that 9 point vol difference (especially in retrospect given that the Feb 13 vol popped too). If this is still in play today, that's one trade to analyze.

2. The Jan 12/13 call spread seems reasonable:
Pay $0.70 for a $1.00 call spread and $0.73 in parity as of the close. Keep in mind though, the MaxGain:MaxLoss is less than 1 (0.43:1). This trade does sell ~ 47 vol and purchase ~ 43 vol, so a vol scalp in a call spread (which is unusual).

3. With earnings in the Feb cycle, any kind of spread that buys the meat and sells elevated OTM options seems reasonable to analyze. This is especially true since as of yesterday, Feb vol was ~ = to Jan vol since Jan went up 14+ points and Feb just 6. Hmm...

4. Do a calendar spread, sell Jan elevated vol and purchase Feb earnings vol at around the same level.

5. For the risky contrarian:
Sell the elevated vol in Jan naked.

This is trade analysis, not a recommendation.

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