30 October 2012 2:10pm
QBE touched a low of $12.95 this morning and has recovered slightly to be trading a bit above $13.00
Top of mind for traders are: i the potential liability of SuperStorm on QBE’s earnings ii will it meet is FY12 guidance
Well, though impact of storm is still too early to tell, but QBE has 2 defenses for now: catastrophes had been light in 2012 and it has increased its provision from premium for 8% ish to 10% ish. So, at current state of play, yes, it’s likely to meet FY12 guidance.
This uncertainty has caused Implied Volatility (IV) in QBE to spike
Rrecent low of IV when stock hit $14, was 19%
last few days as stock fell a dollar from $14 on 19 October, IV has spiked to 24% yesterday.
Spiked IV, prime for options selling.
Those who don’t hold a bearich view on the stock, had been selling
Dec12 $13 and Dec12 $13.25 puts
Good volume on calls today, with minimal put activities
Had have healthy Put/Call ratio all month.
Last week Thursday with stock breaching above $4.10, seemed like an impetus on the upside.
Attracted attention with buyers in Nov $4.40 calls
Implied Volatiliy (IV) now at 42% with stock price $4.25 thereabouts, shows mid point level for stock.
Depth of share price in Sep 2012 showed an IV of 62% whilst height of $6 in Mar this year show a high of 31 on IV
The closest share price was at the IV of 42 like now is in June, when FMG was at around high $4’s and $5.
But, fundamentals haven’t changed, still high in debt.
That might be a suggestion of a bit more to go on the rally.
Options actions on TLS today. High volume on both calls and puts.
This week Thursday is October options expiry
180,000 over contracts in the money in October.
strikes of $3.71, $3.90, $3.86 and $4.00
Majority are likely to be Sold calls for opening trades for covered call positions.
They will need to be rolled to avoid being exercised to sell.
More activities on TLS calls expected this week, but not necessarily a bullish move