CEPH - Vol Buyers, Delta Bets into Earnings Mover

Discussion in 'Options' started by livevol_ophir, Oct 21, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    CEPH is trading $64.05, up 0.4% with IV30™ up 12.7%. The <a href="http://www.livevol.com/">LIVEVOL™ Pro Summary</a> is <a href="http://livevol.blogspot.com/2010/10/ceph.html">in the article</a>.

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    The company has traded 12,000 options today on total daily average option volume of just 2,080. All but 900 (ish) contracts have been calls yielding a 12:1 call to put ratio. The Stats Tab and Day's biggest trades snapshots are included (<a href="http://livevol.blogspot.com/2010/10/ceph.html">in the article</a>).

    The Options Tab (<a href="http://livevol.blogspot.com/2010/10/ceph.html">in the article</a>) illustrates the action. The Jan'11 70 calls have traded over 8,500 times, substantially buying in my opinion. I can't tell if they were done with stock, but it feels like they may have been. Note how vol in the front four months is up, premium buyers are pushing vol into earnings.

    The Skew Tab snap (<a href="http://livevol.blogspot.com/2010/10/ceph.html">in the article</a>) illustrates the vols by strike by month.

    <img src="http://www.livevolpro.com/help/images/blog/ceph_skew_10-21-2010.jpg" width="600" />

    I'm really digging this skew chart. Note how the front month 70 strike is bid way up relative to other strikes around it. So the buying interest in the Jan'11 70 options is pushing vol in Nov; very cool.

    Finally, the Charts Tab (6 months) is <a href="http://livevol.blogspot.com/2010/10/ceph.html">in the article</a>. 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 the last earnings cycle demonstrated a big stock gap down of over $5 (7-28-2010). Earnings are due out again 10-28-2010 after market close (AMC). The Jan'11 calls went up for around 30 vol, and the front month 70 line is now quoting at ~35 vol (see skew chart). Interesting order flow here. The odd thing is that this is NOT just a vol purchase - it's got a delta to it. A stock hedge reduces the delta, but the 70 strike is odd. This could be takeover(ish) trading or super negative delta trading if all calls were tied to stock 1:1 (so they become 70 delta puts).

    This is trade analysis, not a recommendation.

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    Details, trades, prices, vols, skews, charts here:
    <a href="http://livevol.blogspot.com/2010/10/ceph.html">http://livevol.blogspot.com/2010/10/ceph.html</a>

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