DNR - Risky in December Against Range Bound Stock

Discussion in 'Options' started by livevol_ophir, Jun 15, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    DNR is trading 17.02 up 1.0% with IV30&#8482 down 3.9%.

    <img src="http://2.bp.blogspot.com/_hMry1m7UF10/TBe_D_PZcRI/AAAAAAAAC-4/_9HAJOZynPo/s1600/dnr_summary.gif">

    The company has traded over 10,000 options (4,000 + cancelled) on total daily average option volume of just 2,265. ~9,000 options went up in the day's biggest trade, a Dec 14/20 risk reversal (buy puts/ sell calls). The Stats Tab and Day's biggest trades snapshots are included (<a href="http://livevol.blogspot.com/2010/06/dnr.html">in the article</a>).

    The Options Tab (<a href="http://livevol.blogspot.com/2010/06/dnr.html">in the article</a>) illustrates that the calls and the puts in the risky are mostly opening (compare OI to trade size).

    The Skew Tab snap (<a href="http://livevol.blogspot.com/2010/06/dnr.html">in the article</a>) illustrates the vols trading. Dec looks like a pretty "normal" skew. To read what skew is and why it exists <a href="http://livevol.blogspot.com/2010/01/solarfun-solf-call-purchases-with.html">click here</a>.

    Finally, the Charts Tab (6 months) is <a href="http://livevol.blogspot.com/2010/06/dnr.html">in the article</a>. The top portion is the stock price, the bottom is the vol (IV30&#8482 - red vs HV20&#8482 - blue). The yellow shaded area at the very bottom is the IV30&#8482 vs. the HV20&#8482 vol difference.

    The stock has been range bound, albeit a large range. 52 wk. lo is 12.45, 52 wk. high is 19.48. Selling the 20 strike seems reasonable given it has not been that high this year and buying the downside below $14 also seems reasonable given the chart.

    Net this pays $0.10 to have the downside opportunity while selling the top above a high.

    This is trade analysis, not a recommendation.

    Details, trades, prices, vols, skews, charts here: