This is the last time I will write about NAL this week. Really.

NAL ( New Alliance Bancshares Inc.) closed down 0.15 @ 16.32. Cool. The puts moved up as expected. The July Call moved down. The June call with 10 days left MOVED UP 33% ! The IV has gone up to 78% on that option.

If the option was trading @ IV 44%, then the value would have been 0.1, letting me close out with a 40% profit if I could have gotten size at that price. If it was trading at an historic IV , it would be worth bupkis right now. I could have bought back the short option for 0.05 and moved on.

If nothing changes, I will take a loss as theta is eating away at my long, and IV is propping up my short. If the long IV stays the same, I can get out at expiration even.

So on to wild speculation.

[1] Something happens. ( Can be expected with such a high IV.)
Something happens and moves the stock, and the IV on my long stays the same. Once and event is know , the IV will drop. With not that many business days left, not much time for things to haen.

[2] Nothing happens
This is best for me since the same people who are pushing up the IV on the JUN call will start pushing up the IV on the JUL call, pulling me into a profitable trade.

[3] Nothing happens, and people move on.
The JUN’s expire, and no one buys the JUL’s. This would be ok, as I could get out even, as the JUL IV should not move THAT much.

Or maybe I am just crazy and trading thinly traded options do not work the same as trading INTC.

[ UPDATE : NAL traded 957 contracts, INTC 4,799 contracts ]

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This entry was posted on Wednesday, June 6th, 2007 at 7:11 am and is filed under Option Trading.