CROX - Depressed Vol on Moving Stock

Discussion in 'Options' started by livevol_ophir, Nov 24, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    CROX is trading $17.61, up 4.2% with IV30™ down 5.0%. The <a href="">LIVEVOL™ Pro Summary</a> is <a href="">in the article</a>.

    <img src="" />

    I found this stock using a real-time custom scan. This one hunts for low vols.

    <b>Custom Scan Details</b>
    Stock Price &gt;=$7 and &lt;= $70
    IV60™ &gt;= 1
    IV60™ - HV60™ &lt;= -8 and &gt;= -40
    HV180™ - IV60™ &gt;= 8
    Average Option Volume &gt;= 1,200
    Industry != Bio-tech

    The goal with this scan is to identify intermediate-term implied vol (IV60™) that is depressed both to the intermediate stock movement (HV60™) 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) and want to avoid bio-techs (and their crazy vol).

    The CROX Charts Tab (vol only) is included (<a href="">in the article</a>). IV60™ - yellow vs HV60™ - blue vs HV180™ - pink).

    We can see:
    IV60™: 47.06
    HV60™: 58.43
    HV180™: 58.76

    So, IV60™ is depressed relative to the intermediate term and long term realized movement of the stock. I mean, what a CROCS! Ha... What, not funny?... It was my timing, right?... It's always my timing.

    Moving on... Finally, let's look to the Options Tab (<a href="">in the article</a>).

    <b>Possible Trades to Analyze</b>
    1. Though we're lookin at IV60™ (which is more like Jan), the Dec ATM straddle is actually priced at ~48 vol. Purchasing the Dec 17.5 straddle for $1.65 requires that CROX expire out of the range [$15.85, $19.15] if the position is held to expo. The stock has moved ~$0.80 just today. That's ~half the straddle value.

    2. Purchase the Jan 17.5 straddle for $2.80. Yikes, that feels like a lot of premium, though it is depressed vol to the HV measures.

    As I've said on prior posts, another approach is wait for this holiday break to pas by, and look at the prices and vols on Monday of next week. If the trades like better, maybe it's a do, but owning that decay over this dead period feels icky...

    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=""></a>

    Legal Stuff:
    <a href=""></a>