The company has traded over 23,000 options on total daily average option volume of just 915, whoa! The largest trades were a few minutes a part - Sep 17.5 straddle and Jul 15/17.5 strangle sales tied to $16.33 stock, delta neutral. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).
I have also included the stock Time&Sales. Note the "Derivative" Condition. This is the stock that went up with the trades.
The Options Tab (click to enlarge) paints a clearer picture of what traded (everything was a sale). All of the trades were substantially opening with the exception of possibly the Sep 17.5 calls.
Trade Stats
Sell 6,645 Jul 17.5 calls @ $0.20
Sell 6,645 Jul 15 puts @ $0.25
Sell 3,323 Sep 17.5 calls @ $0.80
Sell 3,323 Sep 17.5 puts @ $1.90
Sell 106,500 stock @ $16.33
The PnL chart at Sep expo is included (click to enlarge).
The expo chart is useful, but it's also a little limiting. This trade is short vol, and it can close for a big win (or loss) well before expo. Let's look at the vega:
Sell 6,645 strangles = 6,645*(-.03) = -$21,264/vol
Sell 3,323 straddles = 3,323*(-.064) = -$21,267/vol
Stock has no vega.
Now we can see the trade is in fact a vol sale. Perfectly sized so each trade gets the same amount of short vega. In English, if the vol goes down a point, the strategy wins ~$42,500 (and vice versa). Keep in mind that vega is a function (not a constant), so it changes with vol as well (the second derivative of option price wrt to vol is not zero).
The Skew Tab snap (click to enlarge) illustrates the vols per strike per month.
We can see the July 17.5 calls were the lowest vol of the bunch.
Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.
We can see the stock has dropped pretty hard recently. Last time I touched on this stock (an earnings blog), it was over $20, and that was 4-8-2010. The IV30™ (red line) is actually lower than the realized movement (HV20™ is the blue line). This is a big vol position. I'd even call it a "statement." Really interesting.
This is trade analysis, not a recommendation.
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Interesting.
ReplyDeleteAm I right that short stock is offsetting long puts delta?
Can you explain in a little more details why strangle was chosen for one month and straddle for another one?
Also, why don't just sale double volume of higher Sep volatility instead of doing two trades?
Thanks!