FMG touched a low of $4.24 in the morning of 5 Mar, following weakness in iron ore price (instigated by China’s property price curb).
Options actions in the stock:
– strong activities in calls
– current month implied volatility and At the money strikes calls and puts tell a story – calls’ Implied Vol is much stronger than puts. Showing a lot more demand and interest in calls than puts
– Put/Call ratio on options had been positive in the last 10 days despite stock falling.
– If it Historical Volatility stays within the 39-45 range it has done since October 2012 (is closed under 45 yesterday), then it could be signalling a recovering share price. If not, then we are looking for Historical Vol to go up to 48 and share price falling to under $4.00
Options traders seem to be betting the stock on recovery and historical vol reaching a near term peak. Catalyst could be the 17% fall since mid Feb, post results.
High risk trade for those who want a bet.