Monday, December 27, 2010

Suncor Energy (SU) - Vol Pop

SU is trading $37.28, down 1.9% with IV30™ up 11.8%. The LIVEVOL™ Pro Summary is below.

Suncor Energy Inc. (Suncor) is an integrated energy company. The Company explores for, acquires, develops, produces and markets crude oil and natural gas in Canada and internationally, and it transports and refines crude oil and market petroleum and petrochemical products primarily in Canada.

Random question, here... Why does an OIL company call itself "Sun"cor?... Just sayin'...

I found this stock using a custom scan I built searching for names where IV30™ is up at least 10% today. The scan details are below with a snapshot if you want to build it yourself in Livevol Pro.

Custom Scan Details
Stock Price >= 10
Average Option Volume >= 1,200
Days After Earnings >= 5 and <= 60
IV30™ Percent Change >= 10%
IV30™ >= 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.

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

IV30™: 28.50
HV20™: 22.82
HV180™: 34.17

We can see IV30™ is just now spiking up from its depressed levels. I actually don't know what the news is, unless it was some International Energy Agency (IEA) report.

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

I've highlighted the ATM strikes for Jan and Feb. We can see a little vol diff opening up between those months. We project earnings are due out in the Feb cycle, so that vol difference makes some sense.

Possible Trades to Analyze
1. Buy short-term vol:
Buy the Jan 37 straddle for $2.20.
That's ~28 vol and the stock has moved $0.71 today alone.

2. Buy earnings vol:
Buy the Feb 37 straddle for $3.58.
That's ~32 vol. Naked long earnings vol does feel a little icky.

3. A little fancier in the front:
Do #1 and then sell the Jan 34/40 strangle @ $0.41. This reduces the net debit to $1.79, but does limit the MaxGain to $1.21.

4. For you risk lovers:
Do #2
Sell the Jan 34/40 strangle 2x @ $0.41.
This gets long earnings vol, sells a front month vol pop and pays $2.76.

This is trade analysis, not a recommendation.

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