Gap (GPS) - Vol Pattern to Earnings

GPS is trading $18.25, up 0.4% with IV30™ up 0.6%. The LIVEVOL® Pro Summary is below.



-----------------------------------------------------------


Click for Free Trial

-----------------------------------------------------------

The Gap, Inc. is a global specialty retailer offering clothing, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta brands.

I’ve been on a calendar spread kick of late as Jul vol has remained elevated for a number of companies relative to the approaching earnings cycle in the Aug options. GPS also has come up on the real-time custom scan that hunts for calendar spreads between the front two months. The next earnings report is due out after Jul expo.

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.

Looking to the Skew Tab (below), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).



Last year the summer earnings report for GPS was released on 8-9-2010 and this year I see the report date is set for 8-18-2011 on the company’s IR site. The Aug options expire on 8-20-2011 meaning the depressed vol in Aug to Jul does include earnings.

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).



Here’s where it gets interesting. The last earnings report on 5-19-2011 AMC catapulted the stock down 17%. In other words, the stock can move on earnings, so owning that vol for less than Jul may be an interesting play.

On the vol side, the IV30™ is well above the short-term historical vol (HV20) and about equal to the long-term historical vol (HV180). Specifically:

IV30™: 33.27
HV20: 21.31
HV180: 33.15

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



I wrote about this one for TheStreet.com (OptionsProfits) so no specific trade analysis here -- but the vol diff may be worth some analysis.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

Pre-Market/Post Market: 7-6-2011

To get an e-mail alert when a new pre-market report is posted please send an e-mail to support (support (at) livevol.com) with "Pre-market" in the subject line.

-----------------------------------------------------------


Click for Free Trial

-----------------------------------------------------------



Download as .pdf: PDF Download




Download as .pdf: PDF Download

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

InterDigital (IDCC) - Stock Pops on Patents, Vol Pops Twice

IDCC is trading $45.14, down 3.7% with IV30™ up 3.8%. The LIVEVOL® Pro Summary is below.



-------------------------------------------------------------------


Click for Free Trial

-------------------------------------------------------------------

InterDigital, Inc. (InterDigital) is a holding company, and its various subsidiaries engage in technology research and development activities or in the prosecution, maintenance, enforcement, and licensing of patents.

The stock popped more than $6 on Friday on interesting news in a similar company. I've included a snippet from The Motely Fool:

---
InterDigital popped 17% in intraday trading today. The strength in bids for Nortel's patents was surprising and bodes well for the value of InterDigital's patent portfolio.

InterDigital makes money from patent licensing. It owns 8,800 U.S. and foreign patents, and has nearly 10,000 patent applications pending, primarily related to wireless communications. The strong demand and high bids for Nortel's communications patents are shedding new light on the earnings potential of InterDigital's intellectual property.
Source: InterDigital Shares Popped: What You Need to Know
---

Today, the stock shows up on the real-time custom scan 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, (below).



There's a pretty clear elevated vol in Jul relative to Aug. The next earnings date for IDCC should be in the Aug cycle. The last earnings date was 4-27-11. Last year, with earnings on 4-28-2010, the Jul cycle was 7-28-2011, so there you go... The vol is elevated in Jul because the recent news and stock movement off of that news.

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).



We can see the stock pop of late. Note also the stock gap down two earnings cycles ago. On the vol side, the IV30™ continues to rise today and remains above the historical measures. Specifically:

IV30™: 67.68
HV20: 59.30
HV180: 44.99

So the stock was up $6.02 on Friday, ad is now down $1.73, today. The volatility feels like it should be elevated.

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



Potential Trades to Analyze
There are a bunch of ways to trade this -- all essentially pure speculation.

1. Calendar spreads:
a. The Jul/Aug ATM call spread sells ~76 vol and purchases ~66 vol while owning earnings.
b. The Jul/Aug OTM call spread sells ~78 vol and purchases ~66 vol while leaving more room for stock movement in Jul, easing up on the gamma.

2. Sell vol:
a. The ATM straddle is worth ~$4.90. A sale gives room to ~$40 and ~$50 on Jul expo. But the again, the stock moved $6.02 on Friday.
b. Selling the ATM straddle and covering with the 41/50 strangle collects ~$3.00 and wins if IDCC is in ($42, $48) while risking $2.

3. Buy Vol:
Buying the downside on a 1x2 is an interesting trade. The Jul 45/42 1x2 put spread can be done for ~even and wins with IDCC below $45 to the downside (but above $39), with no upside risk.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

Cemex S.A.B. (CX) - Elevated Vol to Earnings

CX is trading $8.45, down 2.4% with IV30™ up 7.7% as of ~11:15am EST. The LIVEVOL® Pro Summary is below.



-------------------------------------------------------------------


Click for Free Trial

-------------------------------------------------------------------

CEMEX, S.A.B. de C.V. (CEMEX) is a global cement manufacturer with operations in North America, Europe, South America, Central America, the Caribbean, Africa, the Middle East and Asia. CEMEX, S.A.B. de C.V. was founded in 1906 and is based in Garza Garcia, Mexico.

The stock just came up on the real-time custom scan that searches for calendar spreads between the front two months. I’ve used this one several times for OP – let’s try it again.

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 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 look to the Skew Tab (below) to examine the month-to-month and line-by-line vol shape.



We can see how the front month is elevated to the back – the red dot is the ATM vol in Jul. I checked the CX investor relations website and they have posted on their calendar that the next earnings release is 7-22-2011. That means earnings are in the Aug options cycle, not Jul, yet Jul is elevated to Aug.

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).



What I'm interested in here is the vol portion. IV30™ is up today and has now crossed higher than the short-term historical vol (HV20) and the long-term historical vol (HV180). Specifically:

IV30™: 35.52
HV20: 32.67
HV180: 33.95

For the last four earnings cycles, the front month ATM straddle vol was ~50, ~46, ~42 and ~36, respectively. Finally, let's look to the Options Tab (below).



Aug ATM is priced at ~36 vol and Jul is priced at ~42 vol. I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis on this one but it's an interesting vol phenomenon, especially given the recent headlines out of Mexico.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

Pre-Market/Post Market: 7-5-2011

To get an e-mail alert when a new pre-market report is posted please send an e-mail to support (support (at) livevol.com) with "Pre-market" in the subject line.

-----------------------------------------------------------


Click for Free Trial

-----------------------------------------------------------



Download as .pdf: PDF Download




Download as .pdf: PDF Download

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

Gen-Probe (GPRO) - Depressed Earnings Vol to Front; Takeover/Not Takeover... Both?

GPRO is trading $69.91, up 1.1% with IV30™ down 2.8%. The LIVEVOL® Pro Summary is below.



-------------------------------------------------------------------


Click for Free Trial

-------------------------------------------------------------------

Gen-Probe Incorporated (Gen-Probe) is engaged in the development, manufacture and marketing molecular diagnostic products and services, which are used to diagnose human diseases, screen donated human blood, and ensures transplant compatibility.

I wrote about GPRO on 5-23-2011. You can read that post here:
Gen-Probe (GPRO) - Elevated Vol on Takeover Bids, Earnings Gaps and Calendar Spreads

The impetus for the last post was the news:
---
From the post on 5-23-2011:
The stock gapped up on the last earnings on 4-28-11 going from $70.16 to $79.61. Then, a few days ago (5-18-2011), the stock gapped up more than $7 on a bidding war for the stock. In a twenty calendar day period, the stock went from ~70 to over $86.
---

We can see the stock is now back around $70 -- so a whole lot of movin', but not a big change in the underlying. The most recent drop came on 6-6-2011. Here's the news from WSJ.com, written by a friend of mine -- Brendan Conway:

---
Gen-Probe Inc. takeover speculators got crushed in the options market Monday, as new doubts arose that the medical-diagnostics company will be acquired.

Traders closed out bullish positions in call options granting the right to buy the San Diego firm's stock while others scooped up those options for a fraction of their previous value as prices sank Monday. The action comes after The Wall Street Journal reported that most potential suitors have dropped out of the bidding for the company.
Source: As Gen-Probe Suitors Pull Out, So Do Options Traders
---

So there you have it... Buy 'em, no, just kidding...

The stock came up on the same real-time custom scan for calendar spreads between the front two months. This time however, the back month has an earnings report.

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.

Looking to the Skew Tab (below), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).



We can see how the front month is elevated to the back and both months show a parabolic skew, reflecting both upside and downside risk. The ATM vol diff is ~9 vol points, or, said differently, Jul vol is ~ 23%higher than Aug vol with earnings.

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).



On the vol side we can see the IV30™ is in between the long-term historical trend in realized vol (HV180) and the short-term trend (HV20). HV10 is just 22.92 -- so the stock has found a quiet time for last couple of weeks.
Specifically:

IV30™: 43.77
HV10: 22.92
HV20: 52.84
HV180: 30.36

This stock can gap, but it's quiet time now -- or at least, it has been.

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



Potential Trades to Analyze
Last time this showed up on the calendar spread scan, selling the gamma (front month) was not good news. It feels like relatively similar risk, the front month last time was priced at ~50 as well, though the back month was 43 vol as opposed to 41 this time... and there weren't earnings embedded in the back.

1. ATM calendar spread
The Jul/Aug ATM calendar straddle sells ~ 9 vol points higher than it purchases and still allows for ~$5.50 move away (up or down) from $70 for the front month short straddle.

2. OTM calendar spread
The Jul/Aug 65 put spread, or the Jul/Aug 75 call spread, both sell ~ 11 vol points higher than they purchase (so slightly elevated to the ATM vol diff) while taking on a delta bet.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

American Tower (AMT) - Call Buyers

AMT is trading $53.30, up 1.9% with IV30™ up 7.9%. The LIVEVOL® Pro Summary is below.



-----------------------------------------------------------


Click for Free Trial

-----------------------------------------------------------

American Tower Corporation is a holding company. It is a wireless and broadcast communications infrastructure company that owns, operates and develops communications sites.

The company has traded over 11,000 contracts on total daily average option volume of just 3,321. Calls have traded on a 36:1 ratio to puts. The action is in the Jul and Aug 52.5 calls where combined over 9,000 have traded -- substantially purchases on both lines. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls in Aug are opening (compare OI to trade size). While Jul is ambiguous, I believe the Jul existing OI is long.  The stock volume thus far is just ~1.3 million on daily average of 3.3 million, so these feel like naked call purchases.



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



What's odd is that the skew doesn't really show a change in shape. I would have expected the 52.5 line to bump up on the order flow -- at least in Jul.

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).



The implied is still below the HV20 though it has now popped over the HV180.

Possible Trades to Analyze
This is strictly order flow given that the skew is "normal" and the vol is "fair." If you're a believer in the flow, then perhaps owning deltas is the right move. If you're a seller of order flow, then perhaps offering the calls gets some edge.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

Pre-Market/Post Market: 7-1-2011

To get an e-mail alert when a new pre-market report is posted please send an e-mail to support (support (at) livevol.com) with "Pre-market" in the subject line.

-----------------------------------------------------------


Click for Free Trial

-----------------------------------------------------------



Download as .pdf: PDF Download




Download as .pdf: PDF Download

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

ZAGG - Elevated Vol in Front Above Earnings Vol in Back

ZAGG is trading $13.07, down 4.9% with IV30™ up 6.3% as of ~10:55am EST. The LIVEVOL® Pro Summary is below.



-----------------------------------------------------------


Click for Free Trial

-----------------------------------------------------------

ZAGG Incorporated (ZAGG) designs, manufactures and distributes protective coverings, audio accessories and power solutions for consumer electronic and hand-held devices under the brand names invisibleSHIELD, ZAGGaudio, and ZAGGskins.

ZAGG came up on a few custom scans, but I’m focusing on the elevated implied vol relative to historical vol. Let’s look at the custom scan details:

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20 LTE 10
HV180 - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). 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 IV30™ simply because earnings are approaching.

The ZAGG 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).



We can see the stock has risen of late, from around $6 in late March to over $15 less than three months later. On the vol side, IV30™ is elevated to both the HV20 and HV180. Specifically:

IV30™: 110.92
HV20: 80.31
HV180: 89.49

Two things to note – the implied is obviously substantially elevated to the historicals but also note how high the realized vol is. This stock can really move. Let’s turn to the Skew Tab.



This is another of the custom scans that ZAGG appears on – the front two month calendar spread. While Jul vol is priced at around 126, Aug is priced at 104. I believe earnings are due out in early Aug, or at least, after Jul expo. I tried calling IR, but got the voicemail. The last earnings cycle for ZAGG was 5-10-2011, so it feels like a reasonable bet that earnings are in fact after Jul 16th (Jul expo.).

Let’s turn to the Options Tab for completeness.



That vol diff between Jul and Aug is a bit odd. I wrote about this one for TheStreet.com (OptionsProfits) so no specific trade analysis here.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

Pre-Market/Post Market: 6-30-2011

To get an e-mail alert when a new pre-market report is posted please send an e-mail to support (support (at) livevol.com) with "Pre-market" in the subject line.

-----------------------------------------------------------


Click for Free Trial

-----------------------------------------------------------



Download as .pdf: PDF Download




Download as .pdf: PDF Download

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

I Traded an Arb, Today -- Did You?

The ELMG summary is included below.



-----------------------------------------------------------


Click for Free Trial

-----------------------------------------------------------

I traded an arb today, did you? If you didn't, I can show you the tool I used -- and better yet, you can have it too.

We did two trades today. Let's start simple, and then get more complex.

1. Check out the executed trades from LVP in stock ELMG:



You'll see the two lot:
Sell Sep 25 calls @ $8.00
Buy Sep 30 calls for $3.00

Yup, that's selling a $5 call spread @ $5.00. Max Gain is $5.00, MaxLoss is $0 (and commissions).

2. Getting it even better and bigger:
You'll see a thirteen lot:
Sell Sep 25 calls @ $8.00
Buy Dec 30 puts for $0.05

What you don't see is the purchase of 1,300 shares for 32.94. That makes the puts a synthetic call -- specifically, paying $2.99 for the Dec 30 calls.

So the trade becomes:

Sell Sep 25 calls @ $8.00
Buy Dec 30 calls for $2.99

So this not only sells a $5 call spread @ $5.01, but it also owns the Dec options against a Sep sale. Now that's sweet... The Livevol™ Pro Options Tab is included below.



For those of you wondering what this stock is -- it's a takeover for $33 by HON. So, in this example we're dealing with a very low probability that something actually happens to take the stock below $30 -- but it was a free bet.

How Did We Find It?
Livevol® has an advanced Market Scanner called the Livevol® Report Builder (LVRB). One of the scans we've created searches for Vertical spreads (credits and debits) for an arb (so $0.00 or less for debits or GT strike diff for credits). Here's a snapshot of what my dashboard looks like:



It's blank b/c I am hiding the results (boo!). The point is, we have multiple scans open, refreshing at whatever interval we choose, showing us results that satisfy our strategies. Other arbs we hunt for are time spreads for even (or less) and butterflies for even (or less).

Of course, the true power of the LVRB isn't the rare arb, but rather more sophisticated strategies involving vol, deltas, calcs, reversals, conversions, boxes and anything else you fancy. Real-time access to the entire optionable market, strike-by-strike, with access to Livevol® calcs, vols, historical, earnings, dividends and fundamental data.

To read about LVRB, please go here:
LVRB Info

To get a trial to LVRB, please e-mail support "at" livevol.com. The cost is $500 for a one-month trial.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html