THOR - Severe Skew Bend Yields Vol Scalp

livevol_ophir

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THOR is trading $32.88, down 0.9% with IV30™ up 3.3%. The <a href="http://www.livevol.com/">LIVEVOL™ Pro Summary</a> is <a href="http://livevol.blogspot.com/2010/11/thor.html">in the article</a>.

<img src="http://www.livevolpro.com/help/images/blog/thor_summary.gif" />

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This is a skew trade I found. The stock came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

<b>Custom Scan Details</b>
Stock Price &gt;= $5
Sigma1 - Sigma2 &gt;= 8
Average Option Volume &gt;= 1,000
Industry != Bio-tech
Days After Earnings &gt;=5 &lt;=70
Sigma1, Sigma2 &gt;= 1

The snapshot of the scan is included (<a href="http://livevol.blogspot.com/2010/11/thor.html">in the article</a>) in case you want to build it yourself in Livevol Pro™.

<img src="http://www.livevolpro.com/help/images/blog/calendar_spread_scan.gif" width="600" />

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 (<a href="http://livevol.blogspot.com/2010/11/thor.html">in the article</a>), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).

<img src="http://www.livevolpro.com/help/images/blog/thor_skew_11-8-2010.gif" width="600" />


Check out the vol difference between the Nov 36 and Dec 36 calls. It's ~59 to ~44, or 15 points. It looks like there was a call buyer in the Nov 36's and that market has popped hard while Dec 35 popped but Dec 36 didn't. This is a great example of price discovery and how long it takes in the options market.

Finally, let's look to the Options Tab (<a href="http://livevol.blogspot.com/2010/11/thor.html">in the article</a>).


<b>Potential Trades to Analyze</b>
1. Buy the Dec 36 calls for $0.85 and sell the Nov 36 calls @ $0.35 for a net debit of $0.50. This scalps 15 points of vol (ish).

2. A Dec 34/35 call spread purchases 44 vol and sells 46 vol. It's not the greatest vol scalp of all-time, but it does purchase lower vol than it sells in a call spread which is rare. The markets a re pretty wide, I would say $0.40 or less seems reasonable, though it is a bullish bet as opposed to trade #1 which is more vol than delta.

This is trade analysis, not a recommendation.

<b>Follow Live Trades and Order Flow on Twitter: @Livevol_Pro</b>

Details, trades, prices, vols, skews, charts here:
<a href="http://livevol.blogspot.com/2010/11/thor.html">http://livevol.blogspot.com/2010/11/thor.html</a>

Legal Stuff:
<a href="http://www.livevolpro.com/help/disclaimer_legal.html">http://www.livevolpro.com/help/disclaimer_legal.html</a>
 
Quote from livevol_ophir:

THOR is trading $32.88, down 0.9% with IV30™ up 3.3%. The <a href="http://www.livevol.com/">LIVEVOL™ Pro Summary</a> is <a href="http://livevol.blogspot.com/2010/11/thor.html">in the article</a>.

<img src="http://www.livevolpro.com/help/images/blog/thor_summary.gif" />

-------------------------------------------------------------------
<a href="http://www.livevolpro.com/help/free_trial.html"><img height="200" src="http://www.livevolpro.com/help/images/blog/lvp_trial_ad.gif" /></a>

For a limited time we are offering a FREE real-time trial to Livevol Pro™ for non-professional traders. You can get your trial by following the directions here: <b><a href="http://www.livevolpro.com/help/free_trial.html">Click for Free Trial Offer</a></b>
-------------------------------------------------------------------

This is a skew trade I found. The stock came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

<b>Custom Scan Details</b>
Stock Price &gt;= $5
Sigma1 - Sigma2 &gt;= 8
Average Option Volume &gt;= 1,000
Industry != Bio-tech
Days After Earnings &gt;=5 &lt;=70
Sigma1, Sigma2 &gt;= 1

The snapshot of the scan is included (<a href="http://livevol.blogspot.com/2010/11/thor.html">in the article</a>) in case you want to build it yourself in Livevol Pro™.

<img src="http://www.livevolpro.com/help/images/blog/calendar_spread_scan.gif" width="600" />

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 (<a href="http://livevol.blogspot.com/2010/11/thor.html">in the article</a>), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).

<img src="http://www.livevolpro.com/help/images/blog/thor_skew_11-8-2010.gif" width="600" />


Check out the vol difference between the Nov 36 and Dec 36 calls. It's ~59 to ~44, or 15 points. It looks like there was a call buyer in the Nov 36's and that market has popped hard while Dec 35 popped but Dec 36 didn't. This is a great example of price discovery and how long it takes in the options market.

Finally, let's look to the Options Tab (<a href="http://livevol.blogspot.com/2010/11/thor.html">in the article</a>).


<b>Potential Trades to Analyze</b>
1. Buy the Dec 36 calls for $0.85 and sell the Nov 36 calls @ $0.35 for a net debit of $0.50. This scalps 15 points of vol (ish).

2. A Dec 34/35 call spread purchases 44 vol and sells 46 vol. It's not the greatest vol scalp of all-time, but it does purchase lower vol than it sells in a call spread which is rare. The markets a re pretty wide, I would say $0.40 or less seems reasonable, though it is a bullish bet as opposed to trade #1 which is more vol than delta.

This is trade analysis, not a recommendation.

<b>Follow Live Trades and Order Flow on Twitter: @Livevol_Pro</b>

Details, trades, prices, vols, skews, charts here:
<a href="http://livevol.blogspot.com/2010/11/thor.html">http://livevol.blogspot.com/2010/11/thor.html</a>

Legal Stuff:
<a href="http://www.livevolpro.com/help/disclaimer_legal.html">http://www.livevolpro.com/help/disclaimer_legal.html</a>

Good luck on getting any of that filled.....
 
Quote from nltro:

I just "fixed" all the quotes in there. How does it look now?
THOR has Holland Tunnel wide B/A spreads. Your post may look better but the option positions don't :)

FWIW, if you're going to screen a database that provides and IV based on the average of the B/A then you might want to bump up the search criteria a tad because IRL, attainable positions are never as attractive as on paper. Or not :)
 
Quote from spindr0:

THOR has Holland Tunnel wide B/A spreads. Your post may look better but the option positions don't :)

FWIW, if you're going to screen a database that provides and IV based on the average of the B/A then you might want to bump up the search criteria a tad because IRL, attainable positions are never as attractive as on paper. Or not :)

fair enough. just trying to get the discussion started.
 
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