CTAS - Options Bet with Earnings After Close

Discussion in 'Options' started by livevol_ophir, Mar 18, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    CTAS is trading 27.72 with vol up 6%. Note earnings are today after the close.

    The company has traded over 3,700 options in the first 45 min on total daily average option volume of just 966. All but 111 contracts have been calls yielding a 33:1 call: put ratio. The 10 largest options trades have been the Apr 30 calls in unanimity. The Stats Tab and Day's biggest trades snapshots are included (in the article).

    The Options Tab (in the article) illustrates that the calls are mostly opening (compare OI to trade size).

    The Skew Tab snap is included (in the article). You can clearly see the skew for the Apr 30 calls bending up and away (diverging) from the May and Aug 30 calls. In fact, May and Aug upside vol moves down from the ATM, while Apr moves up from ATM.

    Finally, the Charts Tab (1 year) is in the article. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV60™ vs. the HV60™ vol difference.

    Note that CTAS can move big (and gap) on earnings releases. I have highlighted three times in the last year in the chart. Note also a powerful move up in stock since mid Feb in the chart.

    It looks like someone is putting on an earnings trade. Since expo. is this Friday (in 2 days) they are buying April for a move after earnings (immediate) and the drift (as it has shown in the past - see chart).

    This is trade analysis, not a recommendation.

    Details, skews, charts, trades, prices here: