Wednesday, September 7, 2011

Vulcan Materials (VMC) - Elelvated Vol, Stock Pop and Vol Diff

VMC is trading $35.16, up 0.8% with IV30™ down 0.5%. The LIVEVOL® Pro Summary is below.


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Vulcan Materials Company (Vulcan) is a producer of construction aggregates, primarily crushed stone, sand, and gravel. Vulcan has 319 aggregates facilities. The Company is also a producer of asphalt mix and ready-mixed concrete, as well as a producer of cement in Florida.

The stock popped with the entire industry yesterday Here’s a quick news snippet:

Building material stocks also posted huge gains ahead of President Obama's proposal of a $300 billion job creation bill. Stocks like Vulcan Materials(VMC_), up 18%, Texas Industries(TXI_), up 12%, and Martin Marietta Materials(MLM_), up 10%, gained serious momentum
Source: (Beware Stocks' Rally, Expect Volatility: Morning Call, by Evan Lazarus).

The vol also popped nicely yesterday on the news and now the company just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.

The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated front month vol simply because earnings are approaching.

Let’s turn to the Skew Tab to examine line-by-line and month-to-month vols.

We can see “normally” shaped skews for both months with the front elevated to the back on all strikes. There is an interesting kink the Sep 29 puts with slightly elevated vol relative to the surrounding strikes.

Now we can turn to the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™- red vs HV20 - blue vs HV180 - pink).

I’ve highlighted the pop yesterday. Note also the recent 52 wk low – the stock hit below $29 in early/mid August before rebounding.

On the vol side we can see that IV30™ popped in early Aug and has stayed elevated. Interestingly, the short-term realized vol of the underlying has outpaced even that elevated implied. Specifically:

IV30™: 58.96
HV20: 68.77
HV180: 36.54
HV10: 63.48

Finally, let's look to the Options Tab (below).

I wrote about this one for (OptionsProfits), so no specific trade analysis here. I will say that the vol diff to the downside looks like a reasonable position to analyze, especially taking into account the recent 52 wk low as perhaps a "line in the sand." Of course, downside calendars on the same strike or even with diagonals (or reverse diagonals) do have a delta tilt on a stock that has just recently popped on what may either by continuing good news, or just... ya know... no news...

This is trade analysis, not a recommendation.

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