S&P 500 & Nasdaq Analysis and Trends

[AZ123]

Question about implied volatility in KCI...

I was just considering the implied volatility on the KCI options strangle that I purchased yesterday (see the post I've replied to) and started to get worried. I'm hoping that one of you implied volatility experts might be able to help me. =P

The implied volatility on KCI is through the roof right now at 116%: http://www.ivolatility.com/options.j?ticker=kci&R=0&x=0&y=0

Looking back at the June options when the case ruling wasn't priced in (low I/V around 25%) you can gather that buying the $45 June (KCIFI) strike when the underlying price was $42 ($3 below the $45 strike) on May 10th (about one month before expiration), you could get them for .65 per share.

Now if we apply this same scenario to the August 55 calls (KCIHK) next week (about one month out from expiration) assuming that the ruling comes out and all the implied volatility comes out with it, my reasoning says the price of the stock would have to move to $52 ($3 below the $55 strike) just for KCIHK to be ~.65. KCIHK is currently .65 x .95. That means this stock has to move $12 to the upside just for those calls to remain at their current price. This makes little sense to me and completely invalidates trying to play a long strangle position. (A short strangle position would be superior, but I'm not cleared for that kind of trading with my broker). I don't understand why ANYONE would be buying options in KCI right now if this were the case.

I can't tell if I'm right and other opinions would be greatly appreciated. Will all of the I/V come out when the ruling is announced? Do we need a $25 or greater price swing to make any money on a long strangle?

Thanks for any help!