Tuesday, May 11, 2010

Cardinal Health (CAH) - Put Accumulator on Spiking Vol

CAH is trading 35.07 with IV30™ up 22.6%. The LIVEVOL™ Pro Summary is below.

The company has traded over 12,000 options in the first hour on total daily average option volume of just 949. All but 1,908 contracts have been puts for a 1:5 call:put ratio. The largest trades have been the Jun 35 puts where over 9,000 have traded. 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 puts are mostly opening (compare OI to trade size). You can also see that Jun vol is higher than Sep vol even though earnings fall in the Sep cycle (a vol event).

The put purchases are pushing vol up pretty strong - Jun is up 6.2 points or over 20% today. May is also up, Sep is up smaller (see options tab for numbers).

The Skew Tab snap illustrates the vol diff between Jun and the other months (click to enlarge). I've highlighted the Jun 35 strike.

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.

I've put in a horizontal line at $35. You can see the bet pretty clearly - CAH has been below $35 and only recently popped above, then fell below again. Right now it's sitting right on it. You can also see the IV30™ popping as the stock has dropped (like the rest of the market). IV30™ is now the highest it's been over the last 6 months.

One more note - the Jun 35 put purchases are small orders - that's sometimes done to "hide" true size from the market. During the writing of this article, the volume has spiked to over 10,000 now in those puts alone. Again, this stock averages 235 puts total traded a day.

This is trade analysis, not a recommendation.

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