MBIA: Vol Pops Midday; Calendar Call Spread Opens Up

MBIA Inc. (MBIA) together with its consolidated subsidiaries, operates the financial guarantee insurance businesses in the industry and is a provider of asset management advisory services.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.

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.

Let's start with the Skew Tab for this one.


What's so interesting about this one is that the vol diff opens to the upside -- rather dramatically really, while the downside is pretty muted (in comparison).

Now we can turn to the one-year Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side we can see the one-year return has been pretty poor, with the stock trading $12.88 a year ago today.

On the vol side we can see how the implied tends to trade above the historical vols - it's like a consistent and long-running "hold our breath" for this firm wrt to lawsuits, settlements, etc. While the implied is trading considerably above the historical realized vol measures, it's still just in the 45th percentile relative to its own annual history.

What really caught my eye was the Tick Chart today, included below (top portion is stock, bottom Jan vol, very bottom is volume).

We can see that pop in the stock and the volatility just after 2pm EST. Tricky...

Finally, let's look to the Options Tab (below).

Across the top we can see that Jan vol is priced to 96.11% and Feb is priced 83.51% (so ~12.5% vol dif overall). Looking at some OTM calls, we can see the Jan/Feb 10 call spread (for example) is priced to a 17 point vol diff.

Disclosure: This is trade analysis, not a recommendation.

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