The top name on the Optionshouse Covered Call Investigator tool today is Rambus (RMBS). This tool is beneficial in finding potential options where implied volatility is greater than in recent historical volatility, and could potentially present attractive returns by overwriting.
However, always be aware of the upcoming events that may be causing this implied volatility to spike. Earnings, of course, are regularly scheduled events that have a regular impact on spiking implied just prior to the announcement. A quick check of the news on the streaming charts and news tool has the following story from January 5th:
Rambus (RMBS) is recently down $3.79 to $20.28. Rambus antitrust case against several memory manufacturers is scheduled to go to trial on January 11. Rambus has accused Hynix, Micron (MU) and Samsung – the defendants in the case – of eliminating competition and stifling innovation in the computer memory technology and computer memory chip market. The International Trade Commission is expected to make a decision in Rambus’ patent infringement case against NVIDIA (NVDA) in January. RMBS January option implied volatility is at 157, February is at 134; verses its 26-week average of 87 according to Track Data, suggesting larger price movement.
This is a classic case of all indicators pointing to high volatility when the volatility is not necessarily high. This upcoming legal event changes how traders can look at implied volatility. (more…)
