VECO - Depressed Vol and Trades

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

  1. livevol_ophir

    livevol_ophir ET Sponsor

    VECO is trading $38.41, up 1.9% with IV30™ down 2.0%. The <a href="">LIVEVOL™ Pro Summary</a> is <a href="">in the article</a>.

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    <a href=""><img height="200" src="" /></a>

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    VECO designs, manufactures, markets and services enabling solutions for customers in the high brightness light emitting diode (HB LED), solar, data storage, scientific research, semiconductor and industrial markets.

    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 &gt;= $70
    IV60™&nbsp;&gt;= 1
    IV60™ - HV60™&nbsp;&lt;= -8 &gt;= -40
    HV180™ - IV60™ &gt;= 8
    Average Option Volume &lt;= 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 VECO Charts Tab is included (<a href="">in the article</a>). The top portion is the stock price, the bottom portion is the vol: IV60™ - yellow vs HV60™ - blue vs HV180™ - pink).

    <img src="" width="600" />

    We can see:
    IV60™: 38.41
    HV60™: 67.13
    HV180™: 68.14

    So, IV60™ is substantially depressed relative to the intermediate term and long term realized movement of the stock.

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

    <b>Possible Trades to Analyze</b>
    I think it's a reasonable bet that VECO moves away from $38 in the next month and a half. Any call or put spread that has MaxGain:MaxLoss better than 1:1 seems ok. Similar bets in Nov also seem reasonable.

    Stuff like:
    For delta bets:Nov 36/38 put spread, Nov 38/40 call spread.
    More pure vol: Creative Dec spreads (maybe even 1x2).

    It's nice that there are a lot of strikes here for some creative spreads, but don't "commission yourself to death" getting too complicated and trading too many strikes.

    This is trade analysis, not a recommendation.

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