Sonus Networks (SONS) - Size Call Buyer Ahead of Earnings

SONS is trading $2.87, down 3.7% with IV30™ up 20.3%. The LIVEVOL® Pro Summary is below.



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Sonus Networks, Inc. (Sonus Networks) is a provider of voice, video and data infrastructure solutions for wireline and wireless telephone service providers.

The company has earnings due out early next week (8-2-2011) and a very large trade just crossed the tape. This is an order flow note.

The company has traded over 10,800 contracts on total daily average option volume of just 1,889. Calls have traded on a 5425.5:1 ratio, or in English, all but two contracts have been calls. The action is easy -- 10,755 Aug 3 calls have traded today. The largest print was a 10,000 lot, customer purchased outright (no stock) for $0.15. Color provided by Mike Bristow of Vtrader Group. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the Aug 3 calls are essentially entirely opening (compare OI to trade size). A great question here is, who would take the offer side of this trade untied to stock?...



The Skew Tab snap (below) illustrates the vols by strike by month.



We can see the term structure is monotonically increasing to the front. The Aug vol is up 15.1 points or 26% today.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



A couple of things here really stand out. First, check out the earnings moves off of the last two cycles (highlighted in the chart). A stock gap up and then a stock gap down. Second, this time we can see the stock dipping into earnings with IV30™ popping. If this flow continues, I'd expect to see IV30™ hit a new annual high. For the record, the 52 wk range is [35.66, 77.38], so it's not too far from the top level right now.

Possible Trades to Analyze

This is trade analysis, not a recommendation.

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Manitowoc (MTW) - Call Accumulator After Earnings

MTW is trading $13.68, up 1.3% with IV30™ up 7.5%. The LIVEVOL® Pro Summary is below.



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The Manitowoc Company, Inc. (MTW) is a multi-industry, capital goods manufacturer. It operates in two markets: Cranes and Related Products (Crane) and Foodservice Equipment (Foodservice).

The company released earnings on 7-26-2011 AMC (closing at $15.42) and the stock dropped just under a dollar the next day. Since then, the stock has fallen to the mid $13 level. But, there has been some notable order flow in the last two days.

The company has traded just under 9,000 contracts in the first hour on total daily average option volume of just 2,020. Calls have traded on an 11.3:1 ratio with the action in the Sep 15 calls. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the Sep 15 calls have a large existing OI of over 11,000. That OI was 169 yesterday, so ~11,000 contracts opened yesterday, and I believe those are long. The trades today also look like purchases -- I expect that OI to increase again on Monday and that might mean a substantial call accumulator is on the loose.



The Skew Tab snap (below) illustrates the vols by strike by month.



We can see some kinks in the skew -- I've highlighted the 15 strike in both Aug and Sep. That buying pressure has affected the vol, slightly.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



We can see the stock drop off of earnings and then the trail off after. On the vol side, we can see the IV30™ is actually higher now than it was into earnings. Option buyers are out there and the vol is reacting.

Possible Trades to Analyze
1. Aug call skew trade:
The Aug 14/15 call spread sells slightly higher vol than it purchases which is a nice trick in a call spread.

2. Follow order flow:
Accumulating long deltas in some way would be following the order flow. I would note that the bet is in Sep. not Aug.

3. Total opposite:
If there's a buyer out there in Sep calls, perhaps a good sale can be made and covered with stock or some other options.

This is trade analysis, not a recommendation.

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Pre-Market/Post Market: 7-29-2011

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NXP Semi (NXPI) - Earnings Approach, Skew Flattens, Order Flow to Calls

NXPI is trading $20.80, up 1.4% with IV30™ down 1.5%. The LIVEVOL® Pro Summary is below.



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NXP Semiconductors N.V. (NXP) is a global semiconductor company and a supplier. The Company provides High-Performance Mixed-Signal and Standard Products solutions.

The company has earnings due out today, AMC. This is a quick order flow note. The company has traded over 8,700 contracts on total daily average option volume of just 2,501. Calls have traded on a 7.6:1 ratio to puts with the action in the Sep 20 and Aug 22.5 calls. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that both the Sep 20 and Aug 22.5 calls have existing OI greater than trade volume. I believe the Aug calls are short interest against purchases today and the Sep calls have long interest on purchases today. In English, I think the interest in Aug will go down (closing) and Sep should increase (opening).



The Skew Tab snap (below) illustrates the vols by strike by month.



There's a great term structure diff from month-to-month which is apparent in this chart. That crazy vol in the OTM calls in Aug is just reflecting a nickel bid in the Aug 30 calls. Other than that, the skew shows an interestingly flat curve.

Out of curiosity, I checked the skew a month ago (ish) to see if it showed the same shape, and... it did. I've included the Skew Tab from 6-24-2011, below.



Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



The vol pop into earnings is notable, though at this level (68.42) the options are still not at an annual high. The 52 wk range in IV30™ is [30.43, 75.07].

Possible Trades to Analyze
The flat skew is tantalizing as selling calls and buying puts when skew is flat feels like a reasonable trade to analyze. But, given that this shape is "normal" for this stock, tantalizing might go to "not that interesting" pretty fast. Following order flow is another possibility, but then again...

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Whole Foods Market (WFM) - Earnings Out, Skew Shape Changes

WFM is trading $66.53, up 1.7% with IV30™ down 30.7% as of ~10:50am EST. The LIVEVOL® Pro Summary is below.



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Whole Foods Market, Inc. (Whole Foods Market) is a natural and organic foods supermarket. The Company has one operating segment, natural and organic foods supermarkets.

WFM released earnings yesterday, AMC. Here’s a quick snippet that summarizes the results.

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Whole Foods Market Inc. is reporting its third-quarter net income rose nearly 35 percent and raising its full-year forecast. The organic and natural grocery chain said Wednesday that it earned $88.5 million, or 50 cents per share, for the quarter. That's up from $65.7 million, or 38 cents per share, a year earlier. Its revenue rose 11 percent to $2.4 billion.

Analysts on average expected the company to earn 47 cents per share on revenue of $2.42 billion. Whole Foods credited the strong quarter to improving its array of lower-cost products and returning to its emphasis on health and wellness.
Source: AP
---

The vol crush is due to the earnings report, and the options are active. Over 11,000 contracts have traded in the first hour and a half on total daily average volume of just 3,713. Calls have traded on 1.5:1 ratio to puts, which is about average for the company. The Livevol® Pro Stats and Day’s Trades snaps are included below.





Let’s turn to the Charts Tab -- the top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



We can see the stock has made a nice rise from the low/mid 50’s to now in the mid/upper 60’s. We can also see the monster vol crush today, but even after that dip, the implied is still trading above both the short-term and the long-term historical vols. Specifically:

IV30™: 31.85
HV20: 20.48
HV180: 28.86

Let’s turn to the Skew Tab to examine line-by-line and month-to-month vols.



We can see a normal looking skew curve for both months with respect to shape. What is interesting is where the two front months cross each other. The upside is more expensive in Sep and the downside is more expensive in Aug. It’s this discrepancy that caught my attention – specifically the vol diff between the front two months in the 50 strike.

Let’s turn to the Options Tab.



I wrote about this one for TheStreet.com (OptionsProfits) so no specific trade analysis here. I can will say that the 43 (ish) vol in the Aug 55 puts feels expensive and covering with Sep is a possibility. But, I also note that the Sep puts are still priced at over 38 vol which substantially elevated to the historical vols (and yes, I do realize these are OTM puts). Makes that trade less enticing. Other trades on the board may be worth examining.

This is trade analysis, not a recommendation.

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Pre-Market/Post Market: 7-28-2011

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This is trade analysis, not a recommendation.

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Williams Companies (WMB) - Vol Explodes

WMB is trading $32.03, up 4.6% with IV30™ up 40.7%. The LIVEVOL® Pro Summary is below.



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The Williams Companies, Inc. (Williams) is an integrated natural gas company focused on exploration and production, midstream gathering and processing, and interstate natural gas transportation primarily in the Rocky Mountains, Gulf Coast, Pacific Northwest, Eastern Seaboard and the Marcellus Shale in Pennsylvania.

The vol is exploding in this company, the volume is 5x the average, but I can't find a company specific story to push those moves. The company has traded over 158,000 contracts on total daily average option volume of just 32,671. Calls have traded on a 3.9:1 ratio to puts, though I believe a lot of that is closing sales. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates the action. The OI in the Aug 30 calls went down from the mid 70k range today and I believe the sales today will continue to close out that long interest.



The Skew Tab snap (below) illustrates the vols by strike by month.



The skew shapes are quite normal, even pretty. The upside in Aug is bid a little, especially to the 38 and 40 strikes. The real move here isn't skew, it's just the absolute vol.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



The stock has actually tended to move essentially... nowhere. Today there's a pop, but it's the vol move that's impressive. The 52 wk range in IV30™ is [25.72, 44.92], so the pop today pushes WMB well into a new high in vol. Again, I'm not sure about the firm specific news, but this is an interesting one to follow.

This is trade analysis, not a recommendation.

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TriQuint Semi (TQNT) - Earnings Pattern and Vol

TQNT is trading $10.39 down 2.3% with IV30™ popping up 11.4% as of ~ 11:15am EST. The LIVEVOL® Pro Summary is below.



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TriQuint Semiconductor, Inc. (TriQuint) is a supplier of modules, components and foundry services for communications applications. The company has earnings today AMC.

Let’s take a look at the stock price moves over the last eight earnings releases, below.



Over the last six reporting cycles, the stock hasn’t gapped one way or the other. The stock move off of the 10-21-2009 cycle is notable in how large it was.

Today the stock has traded over 8,000 contracts in the first two hours on total daily average volume of just 1,416. Calls have traded on 4.1:1 ratio to puts. I’ve included the Stats Tab and Day’s Biggest Trades below.





Let’s turn to the Skew Tab and examine the month-to-month and line-by-line vols.



As expected, the front month vol is elevated to the back due to earnings. I find the vol diff to be pretty interesting, not that the front is elevated, but by how much.

The Aug ATM vol is priced at ~74 while Sep ATM vol is priced at ~63. Keep in mind that Aug expires on Aug 20th, so it’s a long expo and that dilutes the one day earnings vol. In English, that 74 vol over the entire month implies a very high vol for that single earnings day (today).

Let’s turn to the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™- red vs HV20 - blue vs HV180 - pink).



Most notably, that vol has popped of late. A bet that there's another muted move off of earnings could sell that vol and cover with some other options. Let’s turn to the Options Tab for completeness.



I wrote about this one for TheStreet.com (OptionsProfits) so no specific trade analysis here. I do note that the HV10, HV20 and HV30 are all over 50 vol – so it might be reasonable to assume that Sep vol goes from 64 (ish) to 50 after earnings (or on Aug expo) while the Aug options obviously would expire worthless if they're OTM on expo.

This is trade analysis, not a recommendation.

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