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# HOG - Put Spreader on Call Sales in July

Discussion in 'Options' started by livevol_ophir, Jun 10, 2010.

HOG is trading 26.80, up 2.4% with IV30&#8482 up 9.7%.

<img src="http://2.bp.blogspot.com/_hMry1m7UF10/TBD_Lkl5z3I/AAAAAAAAC5Q/0yz1EU8cEK0/s1600/hog_summary.gif">

The company has traded over 51,000 options in the first hour on total daily average option volume of just 14,645. The largest trade was a July 20/25 put spread purchase funded by a July 30 call sale 2,187x each. The Stats Tab and Day's biggest trades snapshots are included (<a href="http://livevol.blogspot.com/2010/06/hog.html">in the article</a>).

The Options Tab (<a href="http://livevol.blogspot.com/2010/06/hog.html">in the article</a>) illustrates that the puts and the call are mostly opening (trade size >> OI). You can also see the June 28 calls traded 8,430 times, but from what I can tell, that is closing (purchase today to close short interest before).

Buy 2,187 July 25 puts for \$1.24
Sell 2,187 July 20 puts @ \$0.23
Sell 2,187 July 30 calls @ \$0.81
Net debit = 100*2,187*(\$1.24 - \$0.23 -\$0.81) = \$43,740

Max Gain (at \$20) = 100*2,187*\$0.81 + 100*2,187*(\$5.00 - {\$1.24 - \$0.23}) = \$1,049,760

The PnL chart is included (<a href="http://livevol.blogspot.com/2010/06/hog.html">in the article</a>).

Note the naked upside in return for a cheaper spread (smaller debit).

The Skew Tab snap (<a href="http://livevol.blogspot.com/2010/06/hog.html">in the article</a>) illustrates the vols of the strikes in the trade.

Finally, the Charts Tab (6 months) is below (<a href="http://livevol.blogspot.com/2010/06/hog.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.

You can see HOG has traded over \$35 recently and hasn't been below \$23. This could be a hedge by a long stock holder. But it is interesting that vol is jumping today with the VIX down ~10% on the market rally.

This is trade analysis, not a recommendation.

Details, trades, prices, vols, skews, charts here:
in the article

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