Volatility Chart Du Jour: GMCR

• Posted by Adam Warner
• on November 15th, 2009

Kind of interesting earnings reaction in GMCR options after the earnings report last week. Interesting in a “full implosion across the board” sense.

Now this stock itn’t McDonald’s, or even SBUX. GMCR (like pulp) can move, baby. And the stock did in fact drop as much as 15% in the after hours reaction before settling down at 10%.But check out those options. The chart up top shows a 30 day normalized (hypothetical) option, and it dipped from 75 to about 50. That understates the implosion in the actual Novemeber options, some of which carried a 110 volatility ahead of the release.

Implied volatility here sits right near the lows of the last 18 month’s. But when you look at the stock action, what else should they really do? 10 Day HV basically hovers between 30 and 50, save for blips like this week on earnings. And since those blips were more than priced in by the options overbid, even that was a loss for options owners.

Basically, even after the bashing, options in GMCR are a better sale than buy imho.

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