Commercial Metals (CMC) - Takeover Rumors, Skew Bends

Discussion in 'Trading' started by livevol_ophir, Feb 22, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    CMC is trading 16.81, up 11.4% today with vol <i>up</i> nearly 33% (15 points).

    I found CMC on the high option volume scan (option volume relative to each company's average). You can see CMC has traded 1500%+ its daily average in just 2 hours in the article.

    The company has traded over 21,000 options today in the first two hours on total daily average option volume of just 1,378. Further, 19,600+ calls have traded for an 11:1 call: put ratio. The largest trades have been the Mar 17.5 calls (nearly 10,000). The Mar 15 calls (3,013) and Apr 17.5 calls (1,639) are also active. The Stats (Company) Tab and Day's biggest trades snapshots are included (in the article).

    The Options Tab snapshot is also included. Note the trading volume is larger than OI (open interest) - these are substantially opening trades.

    The news seems to be a takeover rumor. With the rumor comes a bend in the skew. You can see the CMC skew today and the SCHN skew (a "peer" with similar market cap) in the article.

    Note the distinct upside bend to the CMC skew in the front month (red) as these options are bid up on the rumor. The second month (yellow) is also relatively flat to a standard skew. SCHN follows a more standard skew. For a full run down on why option skew exists you can read the blog <a href=""><b>HERE</b></a>.

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