Tuesday, September 13, 2011

Western Refining (WNR) - Elevated Vol and Skew Kink on Volatile Stock

WNR is trading $15.88, down 6.0% with IV30™ up 4.6% as of ~11:30am EST. The LIVEVOL™ Pro Summary is below.


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Western Refining, Inc. (WNR) is an independent crude oil refiner and marketer of refined products and also operates service stations and convenience stores. The Company operates in three segments: refining group, wholesale group, and retail group.

I found WNR today because of its elevated vol – specifically IV30™ compared to HV20 and HV180. Let’s start with the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side we can see the large drop (~40%) off of the last earnings report. That drop in price created an HV20 that hit nearly 140%. Since then the stock has found a quieter range and the stock has moved at an HV20 now of ~69. The implied rose after the earnings report (rather than a vol crush), has dipped in the period following, but now has spiked, again, of late. It’s that rise in IV30™ as HV20 has dipped that caught my attention. Specifically:

We can see:
IV30™: 88.03
HV20: 69.53
HV180: 71.88

So, IV30™ is elevated relative to the short term and long term realized movement of the stock. Let’s turn to the Skew Tab.

This stock has a 52 wk range of [$4.74, $21.75], which is quite wide. With the stock down 6.0% today, the downside puts one strike OTM are still priced at over 100 vol while the Oct 15 puts are priced at 88 vol (or right on the IV30™). Other than that, the skew shape looks fairly normal. The Oct 14 puts are priced at higher vol than the Oct 13 puts as there is a small kink in the skew (down) on the Oct 13 line.

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

I wrote about this one for TheStreet.com (OptionsProfits) so no specific trade analysis here, but the elevated vol in the Sep 15 puts looks enticing. The problem of course is owning that vega in Oct means owning that elevated vol.

This is trade analysis, not a recommendation.

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