Friday, June 25, 2010

Noble (NE) - July Call Buyer Pushes Vol

NE is trading $29.20, up 2.6% today with IV30™ up 11.7% with a stock rise. The LIVEVOL™ Pro Summary is below.

Noble Corporation (Noble) is an offshore drilling contractor for the oil and gas industry. To fully understand this stock, you have to read the drilling moratorium news/rumors.

The company has traded over 31,000 options in the first two hours on total daily average option volume of just 7,628. Calls have traded on a 13:1 ratio to puts. The largest trades are in the July 30 calls where nearly 23,000 have traded (pre-dominantly purchases). 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 July 30 calls are mostly opening (compare OI to trade size). You can also see that July vol is above Aug. Projected earnings are just after July expo, I'd be careful with that projection, as it looks like earnings may slip into the end of July based on the vols.

The Skew Tab snap (click to enlarge) illustrates the vols per strike per month. You can see the slightly kinked up skew right on the July 30 line. I'm actually surprised the entire upside skew hasn't changed shape given the size of the volume on that line. You can also see a weird kink upward at the end on the upside, the July 33 line.

What we can see is overall vol is up sharply today (11.7% or 5.41 vol points). That does make sense given the order flow. i.e. people are buying premium in July.

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.

We can see the stock went down hard recently, then recovered and now doesn't know what it wants to. The IV30™ has just passed the HV20™. The stock averages 7.7 million shares a day, and 4.6 million have traded hands so far. I don't see any strong evidence that these calls were done with stock (i.e. turned into straddles or puts). It feels like naked upside with vol jumping.

This is trade analysis, not a recommendation.

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1 comment:

  1. Ophir,

    Agree with your analysis, it looks like naked writing to me. I see a target to $10 in the stock,