FBP - Enormous Option Trade

Discussion in 'Trading' started by livevol_ophir, Dec 16, 2009.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    The stock is trading ~2.65 and vol is up 13% today.

    The company averages 280 option contracts a day. In the first three hours of trading today it has traded over 17,000 contracts. That's 5500% of average volume in half a day.

    The largest trade was a purchase of 15,000 Jun 2.5 puts for 0.65 against ~2.70 stock. This trade was delta neutral. The open interest shows that
    this was an opening trade.

    Since the stock is close to the strike price, this is essentialy a purchase of a straddle. Calculations below:

    Long Straddle = Puts + Calls
    = 0.65 + Synthetic Calls
    = 0.65 + (0.65 + parity + cost of carry)
    = 0.65 + (0.65 + .20 + .01)
    = $1.51

    So the trade is profitable on June expo if the stock is above 4.01 or below 1.49. That's quite a move.
    Interesting trade...

    You can see the detials of the trades, prices, charts and vol on my blog: