Looking for Bargains in a Non-Bargain Market

As we roll into the Memorial Day weekend, when most traders are taking a break, we should have a little less activity than usual.  Stocks are just about at all-time highs for the SPX and the smattering of decent economic news is keeping a floor under stocks for now.   By the end of today, we might be at all time highs but not all stocks are like that.

charts by www.Livevolpro.com

Taking a look at PowerSecure Intl. (POWR, $8.22, up $0.43) the stock was the most volatile (dark green) over a 10 period relative to the 20 day historical volatility.  Over the last week, the stock was up around 7%.  That move, in and of itself, did not generate the volatility. It was the over 50% drop on earnings that most premium sellers fear that drove up the HV.  The biggest jump in price on the tallest spike is a Russian payment processer, QIWI.

3D charts by OptionVision

The business for POWR was pretty good until the last quarter.  They have a client base of utilities looking for systems to save energy for customers.  The Green thing has been a pretty good ride and the future should be better after some management missteps recently. The reported book value for POWR is around $7.

The Trade

For a speculative portfolio selling some OTM puts that get in below book value at the higher IV’s might be a good way to own some of this stock at lower prices.  There are 7.50 strike price options trading on POWR.  A short term jump is probably not in the cards.  atg  Follow Andrew on twitter @optionvol