Tuesday, May 4, 2010

News Corp (NWSA) - Enormous Option Bets into Earnings

NWSA is trading 15.46, down 4.1% with IV30™ up 12.0% into earnings AMC today. The LIVEVOL™ Pro Summary is below.

The company has traded over 23,000 options in the first three hours on total daily average option volume of just 1,619. The largest trades are in June and July. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates the action.

Jun 16 and 17 calls were each purchased 5,000 times. The 16 calls are opening (low open intrest). From what I can tell, the Jun 17 call open interest is also long, so this is a double down.

On 4-27-2010, 5000 Jun 17 calls were purchased against 5000 Jul 14 put sales. The day's largest trades for 4-27 are included (click to enlarge).

The same thing happened on 4-29-2010.

Today another 11,500 July 14 puts traded (sales). Some opening Jul 16 calls (purchases) also traded. Net, the trades on 4-27, 4-29 and today are long 15,000 Jun 17 calls, 5000 Jun 16 calls, short 21,000 Jul 14 puts and long another 1500 July 16 calls for the cherry on top. That's about as long as it gets.

A PnL table is included (click to enlarge). Prices I used (round):
Jun 16 C: 0.60
Jun 17 C: 0.30
Jul 16 C: 0.76
Jul 14 P: 0.35

So there is a "dead" zone or if you prefer "safe" zone between the strikes. But after that, there is some serious cash on the line. In the last 52 weeks NWSA has been below $8 and above $16. It's just off it's high. This bet starts moves at over $1,000,000 for $0.50 in stock pretty quickly.

I've included the Skew Tab (click to enlarge).

Basically, it shows nothing. The upside is not reacting at all - if anything, it looks "cheapish."

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 bumpy, but upward path of the stock. Earnings out tonight I believe (double check that).

This is trade analysis, not a recommendation.

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