BZH - Long Call Position into Earnings with Vol

Discussion in 'Options' started by livevol_ophir, Apr 22, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    BZH is trading 6.23 with IV30&#8482 up 15.4%.

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    The company has traded over 14,500 options today on total daily average option volume of just 1,286. Calls are trading on a 3:1 ratio relative to puts. The largest trade was a sale of the Nov 5/7.5 risk reversal (buy calls/sell puts) @ $0.07. 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 a few things:
    (1) The risk reversal was mostly opening for both the calls (long) and the puts (short). We see this b/c the open interest is significantly smaller than the trade volume.
    (2) The Jun 5 and Jun 7.5 calls are less than OI - need to check if they're opening or closing
    (3) The May vol is up 12.0 points while the back months are more muted.

    The May 5 and 7.5 calls are predominantly purchases. The OI is long - so these are double downs (I checked using the level 2 pop-up and Time & Sales). These call purchases together with the risk reversal are very bullish if not done with stock. Having said that - I dunno if that's the case. Stock has traded over 2x normal volume already. Either way, people are getting long the juice - and vol is spiking with that order flow.

    The Skew Tab snap is pretty interesting - you can see (<a href="">in the article</a>) the upside skew super bent up for the two front months.

    You might see either the Nov 7.5 calls come up, or the other months come down (or a mixture of both). The divergence could converge. Keep in mind, earnings are in this May cycle.

    This is trade analysis, not a recommendation.

    Details, order flow, skews, vols, trades, prices here: