KMB Option IV Is Sky High

The entire Consumer Cyclical sector is killing right now.  PG, CL, CLX and KMB are all at or near all-time high stock prices.  The industry is doing great as a whole; KMB in particular has had a great run higher.  Yet, something a little screwy is happening with Option IV in KMB.  Take a look at the 30 day IV from LiveVolPro of CL, CLX, KMB, and PG.  KMB is the green line:


Livevol (R)

While the rest of the group's IV's are falling,  KMB option prices seem to be climbing higher and higher.  KMB IV is now at the highest level it has seen since the fall of 2011, almost 18 months.  And maybe the highest relative to the VIX that the stock's options have ever traded.  Where is this coming from.  I pulled up the stats and noticed something funny.


Livevol (R)

Total open interest is 2.5X the normal open interest in the name.  Call open interest is actually normal, but put open interest and volume is FAR greater than normal.  I am trying to figure out why and have yet to come up with an answer.  My best guess is that traders are putting on the synthetic call using puts,  but who knows.  This could be outright put buying as well or some mix of the two.  What I do know, is that there is something going on in this name; I am not sure if its a split, a takeover deal, related to some OTC trade.  To make matters more interesting Put skew is super steep in this name, is it possible this name could take an absolute dive?  

The Trade 

This is one to watch.  I think we will have a good idea of what is going on in this name shortly.  If I was on the floor, I would be looking at this name as an excellent ratio spread trade.  I would be looking at a put 1 by 2 in July.  I can buy the July 87.5 puts and sell 2 of the 80 puts for even, or possibly a credit.

If you want to learn what all this means-  This is the type of information we will train you to analyze in our gold course.  If you needed help following this trade, you should be in that course.  Call us at 888 Trade 01 and ask for Anna.



Blog Image: