Tuesday, September 21, 2010

Infinera (INFN) - Call Buying, Skew Discovery Provides Possible Trade

INFN is trading $11.70, down 2.3% with IV30™ up 11.6%. The LIVEVOL™ Pro Summary is below.

INFN is a provider of optical networking systems based on Photonic Integration technology.

The company has traded over 9,700 options on total daily average option volume of just 1,248. All but 254 contracts have been calls yielding a 37:1 call:put ratio. The action has been in the Oct 12.5 calls were over 6,200 contracts have traded with substantially buying interest. 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 (compare OI to trade size). You can also see at the top that Oct vol is up a full 8 points, or 16% while Nov is up just 1.1 points and Jan'11 is up just 0.8 vol points.

The Skew Tab snap (click to enlarge) illustrates the vols by strike by month.

The buying interest in Oct has pushed the entire month above Nov and has created a noticeable kink upward in the OTM calls. Though the 12.5 calls are a bit higher than "normal," it's really the 14 and 15 calls that exhibit a pronounced vol push.

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 vs HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

We can see a few things right off the bat:
1) The stock is in the midst of a pop. Going from $8.28 a few weeks ago to nearly $12 yesterday.
2) The stock gapped up on earnings in late July going from $6.99 to $9.14 (31%) in one day.
3) The IV30™ has just now risen to the longer term realized (HV180™ is 58).

Possible Trades to Analyze
Oct 12.5/14 call spread: Buying the calls that are getting piled on and selling the elevated skew. Total debit of $0.30 if possible. A Nov 12/Oct 14 call spread pays ~$0.85 and buys the cheaper Nov vol (53) and sells the elevated Oct skew (63) while potentially getting earnings in Nov.

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment