US Airways:Calendar Vol Diff Opens Near Expiry As Stock Rises

US Airways Group Inc. operates and owns passenger and freight airline carriers. It allows consumers to obtain flight and fare information, as well as make reservations online.

I found this stock using a real-time custom scan I built. This one scans for calendar spreads between the front two monthly expiries, and even though we are just four days from expiry, this is a compelling vol set up.

Custom Scan Details
Stock Price: GTE $5
Sigma1 - Sigma2 > 7
IV30™: GTE 30
Average Option Volume: GTE 1,200

The goal of this scan is to identify back months that are cheaper than the front by at least 10 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), enough strikes to spread and thus a minimum stock price. I also require a minimum vol level in order to avoid any boring ETFs (or whatever).

Let’s start with the Skew Tab to examine the month-to-month and line-by-line vols.


We can see quite clearly how elevated Feb vol is to Mar across all strikes. While that upside skew in Feb creates an even greater vol diff between the two expiries at those strikes. That is in fact a bit artificial as the Feb options are worth less than $0.05. However, the ATM vol difference is compelling.

Let’s turn to the six-month LCC Charts Tab is included (below). The top portion is the stock price the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).


On the stock side, we can see a nice appreciation where the it has risen from ~$10 to over $15 as of a few days ago, and is now back in the mid $14 range – so ~40% in six months… nice return. The 52 wk range for LCC stock is [$6.78, $15.64], so the stock is nearing an annual high.

On the vol side we can see how the IV30™ (red-line) has been trending downward in general but does trade significantly above the short-term historical realized vol (HV20™ - the blue line). The 52 wk rage for IV30™ is [43.295, 82.84%], putting the current level in just the 15th percentile. So we do have another situation of rising stock price ad dipping vol.

Finally, let's look to the Options Tab (below).


Across the top we can see that Feb is priced to over 70% vol while Mar is priced to ~50%. It’s that vol difference that triggered the scan. Looking at a couple of specific spreads, we can see the Fe/Mar 14 put spread shows greater than a 20% vol diff ad the Feb/Mar 15 call spread shows a 24 vol point difference.

Disclosure: This is trade analysis, not a recommendation.

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