ADM - Call Buyer in Sep on High Vol

Discussion in 'Options' started by livevol_ophir, Jul 14, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    ADM closed at $26.98 yesterday.

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    At 9:45 EST, a 3,010 lot of Sep 27 calls went up. It looks like they were purchases. You can see the tick chart explode upward about $0.40 at that time (<a href="">in the article</a>).

    The company traded over 19,000 options on total daily average option volume of just 6,542. All but 2,605 contracts were calls yielding a 6:1 call : put ratio. The action was in the Sep 27 and Sep 30 calls; purchases from what I can tell. The Stats Tab and Day's biggest trades snapshots are included (<a href="">in the article</a>).

    The Options Tab (<a href="">in the article</a>) illustrates that the Sep 27 calls are mostly opening (compare OI to trade size). It turns out the Sep 30 calls were opening too; the OI today is 8,904 so the previous open positions were also long. This looks like a call stupid (purchase/purchase)

    The Skew Tab snap (<a href="">in the article</a>) illustrates the vols by strike by month.

    It's interesting that the Sep upside shows very little movement to the order flow. You can see the 30, 31, 32 calls are bid up a little, but nothing crazy. If the upside does bend up more, a Sep 27/30 call spread (buy/sell) might be a nice trade if you're bullish on this stock. You may be able to get the spread off for <= $0.85 with stock at $27. Just to be clear, although that would be a nice skew trade; it's first and foremost a bullish bet, NOT a vol bet.

    Finally, the Charts Tab (6 months) is below (<a href="">in the article</a>). The top portion is the stock price, the bottom is the vol (IV30&#8482 - red vs HV20&#8482 - blue). The yellow shaded area at the very bottom is the IV30&#8482 vs. the HV20&#8482 vol difference.

    The stock looks like most others; down hard, recovery, down again, and now a recovery again. Note though how high the IV30&#8482 is relative to the HV20&#8482. The more relevant IV60&#8482 is 30.85 compared to HV60&#8482 of 27.96. In other words, no matter how you slice it, IV is higher than HV.

    This is trade analysis, not a recommendation.

    Details, trades, prices, vols, skews, charts here: