Both WTI and EDMC were midsized, red spikes meaning that they were both up solidly for the day and had 30-day implied volatility trading at a discount to 30-day historical volatility (the crazy spikes were Atlas Energy (ATLS) and Atlas Pipeline Partners (APL)). To me that normally means buy some options and backspread the name. But when you look a bit further, EDMC's implied volatility is starting to crumble from very high levels (chart on the lower right). Also (investigate on your own) WTI's implied volatility discount owes it spread to a one day shock up. Other than that, WTI options look fairly priced at best (option spreads are pretty wide too), but I feel it is a stock ready to keep going up. Another post might have me buying a deep call in here, most likely farther out and riding it, but not today.
Trade: Sell to open 2 EDMC December 12.5 puts at $1.05, with EDMC trading $14.00, or better, on a 30 delta, Risk Level II.
**If the volatility discussion in the above piece interested you, and you want to learn more about volatility, TheStreet's OptionProfit's Team is hosting the first in what we hope will be many webinars. The Title of this one will be "Not All Delta's Are Created Equal." Look for the opportunity to register shortly. You may also check out my blog which focuses on volatility and trading at www.aqumin.com.
Aqumin's AlphaVision (visit http://www.aqumin.com for more information on 3D financial visualization)
At the time of publication, Andrew Giovinazzi held no positions in the stocks or issues mentioned.
Andrew is the Executive Vice President of Business Development for Aqumin, where he participated in the design team to apply AlphaVision to the financial markets. For 15 years he was a member of the Pacific Exchange and the Chicago Board Options Exchange, where he actively made markets and traded in both equity and index options.
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