This chart is the volatility for I don't know what the market is pricing in (I specifically did not try to figure it out) but something is going on. A big move in either direction should not be a shock.
This brings up another point. Sometimes options have too much premium to even sell. The Jan 7.50 puts were bid at $1.30 at the close. That kind of premium for a strike 50% away from the market says to me that market thinks $7.50 (or maybe more correctly $6.20, $7.50 minus the premium) by January 19 is within the realm.
As a matter of philosophy I don't believe the options market gives away money for nothing.
8 comments:
NFLD is Northfield Labs.
Newfield Exploration is NFX.
thank you.
wrong name but the numbers are all for NFLD a $15 dollar stock with $7.50 puts bid at $1.30.
NFLD Jan out of money 20 call was last traded at $ 1.40. This suggests someone thinks NFLD could go from $ 14.79 to $20 with just much probability as going down to $7.50. In fact there are a lot of open interest for NFLD Jan 30 call(over 10000). I wonder who can suugest the best way to play this opportunity, where the implied volatility(option premium)exceeded the volatility of the stock.
This is great information. I will sell a couple calls and puts way out of the money to pocket a couple hundred dollars. No way this stock goes to 4.50 with the results from the drug failing.
Dway
Early this morning, Trevor Williams(chief economist for Lloyds TSB worldwide) said on CNBC worldwide exchange that 'If the Fed lowers rates in the first Quarter, 10 Year rates could drop down to 4%. If the Fed waits until the 2nd or 3rd quarter, 10 year rates could rise up to 5% before falling.' This statement has a lot of moving parts with implications about Forex, inflation, and whether the bond market has the slowdown right or not. What's your take on this timing call, Roger? Thanks Tom in Indy
The reason for the spike in volatilty is that they are expecting top-line results in Q4 from a trial for PolyHeme.
nfld down around 14% so far today.
And truer words haven't been spoken - "don't believe the options market gives away money for nothing" - nice call and what a great fall!!!
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