RINO - Elevated Vol Trading Opportunity

Discussion in 'Options' started by livevol_ophir, Sep 27, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    RINO is trading $13.64, up 5.0% with IV30™ down 1.7%.

    <img src="http://3.bp.blogspot.com/_hMry1m7UF10/TKCqVGFCkPI/AAAAAAAAE_Q/pnGv-JCtHkg/s1600/rino_summary.gif">

    I found this company using a custom scan for elevated vol from Livevol Pro™. The details are below.

    <b>Elevated Vol Scan Details</b>
    Custom Scan Details
    Stock Price >=5
    IV30™ - HV20™ >= 10
    HV180™ - IV30™ <= -8
    Average Option Volume >= 1,200
    Industry != Bio-tech
    Days After Earnings >=10 and <= 60

    Let's look at the Charts Tab (6 months) to visualize the result (<a href="http://livevol.blogspot.com/2010/09/rino.html">in the article</a>). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

    We can see the short-term realized is 45, long term-realized is 69 and the IV30™ is ~79. Next let's turn to the Options Tab (<a href="http://livevol.blogspot.com/2010/09/rino.html">in the article</a>) and see if we can analyze a trade.

    <b>Possible Trades to Analyze</b>
    Selling the Oct 13/14 strangle @ $1.15 sells 68 vol (ish). This makes money is RINO is in ($11.85, $15.15) at Oct expo. Alternatives include selling the 13 or 14 straddle. Keep in mind, selling the 13 straddle is slightly bearish, and selling the 14 straddle is slightly bullish. Covering any of these sales with the Oct 15 calls is a relatively cheap insurance to the upside (~59 vol).

    This is trade analysis, not a recommendation.

    Details, trades, prices, vols, charts here:
    http://livevol.blogspot.com/2010/09/rino.html

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