Monday, April 26, 2010

Northrop (NOC) - Bullish Positions Grow into Earnings

NOC is trading 68.94 with earnings coming up 4-28-2010 BMO. The LIVEVOL™ Pro Summary is below.

The company has traded nearly 14,500 options in the first two hours on total daily average option volume of just 1,228. All but 230 contracts have been calls. The largest trades have been the Nov 70 and 80 calls. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates that the calls are mostly opening (volume > OI) and a further investigation shows that this OI will be larger than almost any other line (other than Jan '11 70 calls which are also long OI).

The trades are listed as a spread - but I don't see that at all. I see that as a purchase of the Nov 70 calls for $3.80 against a $3.60-$380 market. AND, I see the Nov 80 calls traded $0.80 against a $0.70 - $0.85 market. That doesn't look like a spread, it looks like purchase/purchase or more commonly known on the floor as a call stupid. Combine that with the 8,000+ long OI in Jan '11 70 calls and that's some bullish OI.

Note that today the stock is not real active - ~500k shares have traded against average daily volume of ~ 2 million. I note this b/c it does not look like these calls are trading with a stock hedge.

The Skew Tab snap is interesting - the Nov calls aren't bending upward but the Jun 80 calls are. I've highlighted the 80 strike (click to enlarge).

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.

You can see the stock has basically been going straight up.

This is trade analysis, not a recommendation.

Disclaimer: I'm long a little NOC stock so I am rooting for this thing to go up. Don't mistake that as advice - I'm just like everyone else, I want longs to go up and shorts to go down. I don't recommend anything.

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