DAN - Betting Bullish After Dive

Discussion in 'Options' started by livevol_ophir, Jul 6, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    DAN is trading $9.20, down 3.1% today with IV30&#8482 up 3.9%.

    <img src="http://3.bp.blogspot.com/_hMry1m7UF10/TDN0LAhVAfI/AAAAAAAADXQ/fqKJeEekU64/s1600/dan_summary.gif">

    Dana Holding Corporation (Dana) is a supplier of axle, driveshaft, structural, sealing and thermal management products for global vehicle manufacturers. It designs and manufactures products for every vehicle producer in the world.

    The company has traded over 5,000 options on total daily average option volume of just 1,394. The action is in the Dec 15 calls (purchases) and Jul 10 puts (sales). The Stats Tab and Day's biggest trades snapshots are included (<a href="http://livevol.blogspot.com/2010/07/dan.html">in the article</a>).

    The Options Tab (<a href="http://livevol.blogspot.com/2010/07/dan.html">in the article</a>) illustrates that both the calls and the puts are mostly opening (compare OI to trade size). You can also see Aug vol is elevated to the rest of the months because of an earnings cycle (a vol event).

    The Skew Tab snap (<a href="http://livevol.blogspot.com/2010/07/dan.html">in the article</a>) illustrates the vols by strike by month.

    It's a pretty normal lookin' skew; note the Dec upside (17.5) actually bend back up a bit, but the Dec 15 calls are the lowest vol in the entire options chain. That's a little weird given the order flow. My guess is that if the flow continues, that vol will rise accordingly.

    Finally, the Charts Tab (6 months) is below (<a href="http://livevol.blogspot.com/2010/07/dan.html">in the article</a>). The top portion is the stock price, the bottom is the vol (IV30&#8482 - red vs HV20&#8482 - blue). The yellow shaded area at the very bottom is the IV30&#8482 vs. the HV20&#8482 vol difference.

    A few things to note:
    1) The stock fell off a cliff a few weeks ago.
    2) It had a couple days of "nothingness". (i.e. Chartists may call this, "building a base.")
    3)The IV30&#8482 has moved well past the HV20&#8482 (about 75.50 to 60.0)

    This stock chart is actually pretty similar to a bunch of stocks in the market right now. The order flow in Dan is a turn to the upside. The real question is, will the market "build a base," or are we headed for another cliff dive. One scenario calls for big vol sales, the other, for big vol purchases. Heads or tails, heads or tails, heads or ....

    This is trade analysis, not a recommendation.

    Details, prices, trades, vols, skews, charts here:
  2. Carl K

    Carl K

    Supply ~ $7
    could swing up short term, before heading toward support.

    Enjoy life, it's limited.
    You only get as much as you take.