Hong Kong (EWH) - Put Buyer is Back; Bet on Uneasy Markets

Discussion in 'Options' started by livevol_ophir, Sep 29, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    EWH is trading $18.00 even, up 0.5% with IV30™ up 3.0%.

    <img src="http://2.bp.blogspot.com/_hMry1m7UF10/TKOQ1eBIGCI/AAAAAAAAFBw/dQpLJmYzq_U/s1600/ewh_summary_9-29-2010.gif">

    I've written about the Hong Kong ETF twice within the recent past. You can read either one below:

    9-17-2010: <b><a href="http://livevol.blogspot.com/2010/09/ewh.html">Hong Kong Index (EWH) - A Bet on Calm Broader Markets</a></b>
    6-30-2010: <b><a href="http://livevol.blogspot.com/2010/06/ewh.html">EWH (Hong Kong ETF) - Huge Bet on a Downturn in Hong Kong</a></b>

    Today, the put buyer is back....

    The ETF has traded over 10,290 options on total daily average option volume of just 1,925. All but 20 (twenty!?) contracts have been puts yielding a 500:1 put:call ratio. Two trades made up the volume on simultaneous execution: 5,000 Mar'11 16 and Mar'11 17 puts were bought versus 310,000 shares or a 31 delta. Trading extraordinaries Cathy Clay and Kevin Nichols gave me color and alerted me to the trade. The Stats Tab and Day's biggest trades snapshots are included (<A href="http://livevol.blogspot.com/2010/09/ewh_29.html">in the article</a>).

    <img src="http://www.livevolpro.com/help/images/blog/ewh_stats_9-29-2010.gif">

    The Options Tab (<A href="http://livevol.blogspot.com/2010/09/ewh_29.html">in the article</a>) illustrates that the puts are opening (compare OI to trade size). You can also see that Jan'11, Mar'11 and Jan'12 vol is well above Oct, Nov and Dec. Though it's a stretch to use the term with options, this would be considered "backwardation."

    The Skew Tab snap (<A href="http://livevol.blogspot.com/2010/09/ewh_29.html">in the article</a>) illustrates the vols by strike by month.

    <img src="http://www.livevolpro.com/help/images/blog/ewh_skew_9-29-2010.gif" width ="500">

    No real skew change which does surprise me. In stead, Mar'11 vol is up 0.3 points compared to Jan'12 which is down by the same amount.

    Finally, the Charts Tab (6 months) is below (<A href="http://livevol.blogspot.com/2010/09/ewh_29.html">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 an awesome price jump over the last month. On the bottom we can see that the IV30™ is in fact still below the HV180™. Note also that it traded well above the HV180#&amp;8482 for nearly four consecutive months prior.

    This trade comes back tot he post on 6-30-2010; a bet that Hong Kong sees some stock market volatility and some losses of the recent highs. The gold story I posted today had the opposite sentiment. It was bullish (ish)... Did I just say ish - ish?... Hmm... Not enough coffee?....

    This is trade analysis, not a recommendation.

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

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