Friday, January 22, 2010

UltraShort Basic Materials (SMN) - Enormous Prediction

SMN closed 8.50 yesterday with IV30™ up 16%. The LIVEVOL™ Pro Summary is below. Note also at the botom of this blog the trades today in the long version of this index.

The company traded nearly 140,000 options yesterday on total daily average option volume of 4,144. That's nearly 3,500% of the average. Further, all but 88 contracts were calls for a 1578:1 call:put ratio. The Company Tab snapshot is below (click the image to enlarge).

Essentially the entire volume was a 131,028 lot purchase (on two prints) of Apr 12 calls for 0.375. The day's biggest trades and Option Tab snapshots are inlcuded below (click either image to enlarge).

The Apr 12 calls had OI of 77,843 - the OI today is over 209,000 - this indicates the prior trades (old OI) were also purchases. You could have verified this yesterday by looking at trade history on the Time & Sales Tab. The Level II pop up illustrated that there was an opening position (increasing OI position) on 11/27 in these calls. The Time & Sales Tab snap shot is included below - you can see these were purchases - so we knew yesterday that the additional purchases would push OI up - these are a double down bet (click the image to enlarge it - note I used a filter to find the larger trades).

Finally the Charts Tab snapshot below illustrates three things:
(1) That SMN has been much higher recently (over 17) - 52 wk. high is 57.
(2) The vol (both historical and implied jumped)
(3) The level of option volume is highly unusual.

Click the image to enlarge.

This is a ~$5,000,000 bet that Basic Materials get hammered (and thus the short shares increase).

Quick Update:
The XLB Materials Select SPDR (similar to the long version of the above) just traded 90,000+ puts purchased in March. The entire Company Tab is included below (click to enlarge). That's 90k puts in one hour on total daily average option volume of just 10k. This is the same side as the above trades (long delta in the short = short delta in the long).

Legal Stuff:

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