China MediaExpress Holdings: Options Market Suggests Future Is Bleak

Ian Bezek submits:

The high drama at China MediaExpress Holdings (CCME) has carried on this week, with shares nosediving more than 10% Tuesday following this negative SA blog post, followed by a dive and gigantic recovery after Muddy Water's latest report failed to rattle shareholders with CCME closing Wednesday up almost 7%. It appears that the market is unsure what to make of all the allegations against CCME with the stock sitting smack in the middle of the $10-$15 range it has been trading in for the past month.

However, the options market paints a different picture. It suggests that the odds significantly favor the bearish side at CCME. Either CCME is guilty like the bears charge, or CCME call options are wildly underpriced.

Normally the implied volatility (a measure of a stock's anticipated volatility in the future) of a stock's options is roughly the same for call and put positions. Puts sometimes


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