GPS - Option Winner Rolls to Better Vol

Discussion in 'Options' started by livevol_ophir, Mar 17, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    GPS is trading 23.04.

    If the trades below are the same person, this is one of the best trades I've seen in a while.

    The company has traded nearly 37,000 options in the first hour on total daily average option volume of just 4,332. All but 300 contracts have been calls. The largest trade has been a three legged Apr 24/ Jun 14/ Jun 24 call spread. The Stats Tab and Day's biggest trades snapshots are included (in the article).

    The Options Tab (in the article) illustrates that the Apr 24 calls are opening (compare OI to trade size). The Jun 14 and 24 calls are sales on OI of purchases (closing). Note that even though these are closing trades we can't tell if it's the same firm/trader closing the initial position. The Apr 24 calls are opening purchases.

    The Skew Tab snapshot is included (in the article). GPS demonstrates a pretty normal skew shape. For an understanding of what "normal" skew is and why it happens you can go here:

    In the skew chart, notice that the opening purchase is the lower vol.

    Finally, the Charts Tab (6 months) is in the article. 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 IV60&#8482 vs. the HV60&#8482 vol difference.

    You can see the stock has gone up strongly over the last month. That means the Jun 14/24 call stupid (long/long) that was purchased originally was a big winner. Now the trade is closed for that win and opening an Apr 24 call purchase of relatively lower vol (see skew in article).

    This is trade analysis, not a recommendation.

    Details, trades, charts, skews, prices here: