Friday, October 25, 2013

Aqumin Volatility Newsletter 10/25/2013 $FSLR

Trading the pop in FSLR

The market is kind of poking along in an upward fashion. With most global news ok there is not a big reason to sell off yet. The gloomy unemployment reports are keeping the hopes of cheap money alive for the short term. On Wednesday afternoon I was running a normal scan with OptionVision™.

I noted FSLR had one of the higher IV’S over realized for the past 60 days. The name also was one of the top performers in tech when the rest of the NASDAQ had been off to the races.

10-25-2013 8-21-09 AM

What surprised me at the time was that the front month volatility in FSLR was pretty elevated. It was near 70% at the money at the time. Earnings are at the end of October and usually the off cycle earnings month declines to a value somewhere around the trailing 30 day historical volatility. 30 day HV was only 44% so the options expiring on Friday were pretty high.

The reason of course was that FSLR made such large two day moves earlier. That kept the IV especially high in the near term. Note below that the IV crashed (red) in that term today even as the IV spiked in the earnings month (green).

10-25-2013 8-19-53 AM

The next time a stock has a nice move up prior to earnings, think about a time spread that buys the earnings month and sells the shorter term month. A day like today would pay big. Close the whole thing prior to earnings.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

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