Thursday, September 22, 2011

James River Coal (JRCC) - OTM Call Buying Explodes

JRCC closed yesterday at $7.74, down 14.6% with IV30™ up 10.6%. The LIVEVOL® Pro Summary is below.



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James River Coal Company mines, processes and sells bituminous, steam- and industrial-grade coal through six operating subsidiaries (mining complexes) located throughout eastern Kentucky and in southern Indiana.

With the market down size yesterday and again today (at least on open), here's an interesting order flow in the opposite direction. The company traded just under 16,000 contracts on total daily average option volume of just 1,298. Calls traded on an 11.5:1 ratio to puts with the action in the Oct 10 and Nov 9 calls -- substantially purchases on tiny OI. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls in both months are mostly opening (compare OI to trade size). The color in the Oct 10 calls I got was:
"JRCC Oct 10 Calls ppr paid .25 on 7k; xx-ed"

If you look at the largest trades snap, everything is Oct 10 or Nov 9 calls, with the Nov 9 all trading on the offer on $0.25 wide markets with AutoExec. Someone just swooped in and lifted the calls. When looking down the entire option chain for JRCC, I don't see any OI larger than 900, so both of these trades are huge. Today the OI is 7,405 and 3,884 in the Oct 10 and Nov 9 calls, respectively.



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



What's odd is that the skew doesn't really show a change in shape. I would have expected the upside to be bid in both months.

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 has been falling hard of late. This was a ~$22 stock in late July and now it's trading below $7.50 as of this writing. On the vol side, IV30™ is up to 81.86 (up another 7.4%) as of this writing.

Possible Trades to Analyze
I dunno, but... that's a lot of call buying in a stock down 75%.

This is trade analysis, not a recommendation.

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2 comments:

  1. A relatively cheap hedge for the shorts?

    ReplyDelete