Monday, December 13, 2010

Radian (RDN) - Calls Active in Jan on Mortgage Data

RDN is trading $8.07, up 1.4% with IV30™ up 9.5%. The LIVEVOL™ Pro Summary is below.

RDN is a credit enhancement company. The Company operates in three business segments: mortgage insurance, financial guaranty and financial services. This morning they released some delinquency data on mortgages.

I wrote about RDN on 10-11-2010. You can read that post here:
Radian Group (RDN) - Depressed Vol into Earnings.

Basically, I noted that IV60™ (intermediate-term implied vol) was depressed relative to HV60™ (intermediate-term realized vol) and HV180™ (long-term realized vol).

In the first two and a half hours today the company has traded over 15,000 contracts on total daily average option volume of just 3,905. Over 13,000 Jan 9 calls have traded (substantially buying in my opinion), yielding a 24:2 call:put ratio. 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). There doesn't seem to be an OI greater than 8,000 on any one line and if we exclude the Dec 8 calls, there isn't anything greater than 5,000... So the Jan 9 action is substantial for this name.

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

We can see that the Jan vol is elevated to the upside, but oddly enough, the Jan 9 line is not. It's actually the Jan 10 and 11 options that have juicy vol.

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).

We can see the stock has kind of stumbled along. The vol chart is interesting. I have highlighted in yellow the vol level of the Dec 9 calls. We can see it's well below the HV180™, though above the HV20™.

The stock price is off about 8% since I wrote about in mid October. The Jan 9 straddle is worth ~ $1.60, that feels sort of fair(ish). The Jan 7.5/9 strangle is worth about $0.80 - also kind of fair(ish). I don't see a great trade here... Maybe a Jan 9/10 call spread is worth analyzing further if it can be done for $0.20 or less.

This is trade analysis, not a recommendation.

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