AET - Earnings Preview

Discussion in 'Options' started by livevol_ophir, Nov 2, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    AET is trading $30.20, up 1.3% with IV30™ up 7.5% into earnings tomorrow before the bell. The <a href="">LIVEVOL™ Pro Summary</a> is <a href="">in the article</a>.

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    The company has traded over 20,000 options on total daily average option volume of just 3,779. Nov has the action with over 6,000 Nov 32 calls and over 5,000 Nov 27 puts trading. 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 calls are mostly opening (compare OI to trade size), puts are ambiguous. It seems to me that both are purchases today.

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

    Normal looking skew with front month elevated to the back as expected.

    Finally, the Charts Tab (6 months) is <a href="">in the article</a>. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

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    We can see the stock gap down hard on last earnings. In general AET is actually a reasonable bet to sell the earnings vol and then cover the next day (ATM straddle one day sale). The average IV over the last four cycles according to my calculations was 42.14; today the ATM is priced at ~42.8, so basically, the same place. The strangle buyers (even if it's different people buying the calls and puts) is noticeable in terms of size. I feel like a 1x2 OTM could be worth analyzing, but I'm not in love with selling the straddle naked this time, though a $2.25 straddle is pretty juicy.

    This is trade analysis, not a recommendation.

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