GYMB - Stock and Vol Explode on Potential Sale

Discussion in 'Options' started by livevol_ophir, Oct 1, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    GYMB is trading $48.20, up 16.0% with IV30™ up 13.2%.

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    The News from AP:
    Shares of children's clothing seller Gymboree Corp. rose 22 percent in pre-market trading on Friday after a published report said it was considering selling itself to a private equity firm.

    Citing unnamed sources familiar with the matter, The Wall Street Journal said the company, based in San Francisco, is considering selling itself. The report said there is no auction process, however, and Gymboree might decide not to sell itself.

    A call seeking comment was made to Gymboree but it was not immediately returned.

    The company has traded over 14,000 options today on total daily average option volume of just 629. The action has been in the front month, Oct 50 and 55 calls. The Stats Tab and Day's biggest trades snapshots are included (<a href="">in the article</a>).

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    The Options Tab (<a href="">in the article</a>) illustrates that the calls are mostly opening (compare OI to trade size). I believe these are sales. I think there was a hidden $1.10 offer in the Oct 50 calls for a while, it may still be there.

    Note that Oct vol has exploded, Nov vol is up about 5%, but the two back month vols are down. Hmm... That points to the potential that this may actually happen, at least in my opinion.

    The Skew Tab snap (<a href="">in the article</a>) illustrates the vols by strike by month.

    It's a bit jagged but generally a touch higher vol in the upside than "normal" skew.

    Finally, the Charts Tab (6 months) is below (<a href="">in the article</a>). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

    We can see the IV30™ ripping with the stock gap up. Also, at the very bottom of the chart, the green volume bar indicates that customer opening order purchases on the ISE for calls are outpacing puts. Selling the Oct 50 calls @ 1.10 feels like a crazy good vol sale, but then again, if the stock is taken over for $60, you pretty much got your face ripped off. A buy write (covered call) may work here as well, but if the company comes out with "different" news tomorrow, the $7 ride up in stock price could go right back down. Generally, this is a risky one, buy writes feel "ok" ish, though risky.

    I bet there are some cool spreads in there, haven't looked very carefully yet.

    This is trade analysis, not a recommendation.

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

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