Madison Square Garden Falls on LeBron James Rumors; Volatility Elevated (MSG)

Shares of Madison Square Garden MSG are falling today by over 5.00%, currently trading at $20.48. The stock popped yesterday on rumors that LeBron James would be signing with the New York Knicks, which are owned by MSG. The stock is giving up all those gains and more today on the rumor that L.J. will be instead going to the Miami Heat. Call Volume is reigning for the second day in a row. Yesterday, the July $22.50 call was active, trading over 17,000 contracts, but much of that volume was intraday purchases and sales, with open interest not being effected much at all. Today, 27,000 calls have traded versus only 6,000 puts. The majority of the action is coming on the July $22.50 strike once again, where 20,607 contracts have traded, so far, on open interest of 7,716 contracts. Again, call trading has been mixed, with call purchased, on the offer, and call sales, on the bid, occuring all day long; on the margin, call purchases are outweighing call sales. Similar, wishy-washy action can be seen on the July $20 put as well. Volatility has exploded in the name over the past two days. Yesterday, implied volatility was 54%, today the at-the-money straddle is trading at 63%; historical vol is nearing 55%. In comparison, the August $20 straddle's implied vol is only 47%. Traders should consider selling the July $20 straddle and buying the August $20 straddle as a volatility convergence trade.