Friday, March 4, 2011

TIVO - Implied Risk Criss Crosses on Upside Skew

TIVO is trading $$9.37, down 0.8% with IV30™ up 2.3%. The LIVEVOL® Pro Summary is below.


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TiVo Inc. (TiVo) is a provider of advanced television technology and services that redefines home entertainment by providing consumers with an easy way to manage, control, watch, and record live television and receive thousands of movies and television shows from cable, broadcast, and broadband sources in intuitive user interface.

This is the perpetual law suit name -- embroiled in legal action against others seemingly for the last... forever...

An interesting vol phenomenon has arisen, so let's take a look.

The company has traded over 50,000 contracts on total daily average option volume of just 15,708. Calls have traded on a 5.2:1 ratio to puts. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates the action. Check out the vols for each month ATM and upside skew.

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

Check this out: The ATM vol in Mar (9 strike) is 82. The ATM vol in Apr is 102. Without even doing a news look up, clearly the option markets reflect substantially more risk in Apr than Mar (and it's not an earnings release b/c that just happened three days ago). But... the OTM calls are much more expensive (read: higher vol) in Mar. Ah ha... That is an interesting opportunity to analyze.

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 gaps up or down basically every 10 weeks (ish) -- nothing feels settled yet, certainly not with vol in Apr over 100.

Possible Trades to Analyze
I'm going to leave this generic: The trades that seem worthy of further investigation (like reading up on news) are the ones that sell elevated vol in the front month on the wings covered by the lower vol wings in the second month (or third month). That seems (at first blush) to allow a purchase of "event" vol for lower than "non-event" vol. Very interesting...

This is trade analysis, not a recommendation.

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