IBKR - Masive Bet for New Lows

Discussion in 'Options' started by livevol_ophir, Aug 26, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    IBKR closed at $15.97 yesterday. The <a href="http://www.livevol.com">LIVEVOL&#8482 Pro Summary</a> is below.

    <img src="http://3.bp.blogspot.com/_hMry1m7UF10/THZoxHrqpOI/AAAAAAAAEWU/4tiXW_rwjds/s1600/ibkr_summary.gif">

    The company traded over 181,000 (not a typo) options on total daily average option volume of just 4,229. All but 757 contracts were puts, yielding a 239:1 put:call ratio. The largest trade was a purchase of 100,000 Jan'11 14 puts for $0.30 with a sale of 50,000 Jan'11 15 puts @ $0.60, tied to a sale of 350,000 shares @ $15.90, on PHLX. This color was provided by Darren Story at Student Options on the floor. The Stats Tab and Day's biggest trades snapshots are included (<a href="http://livevol.blogspot.com/2010/08/ibkr.html">in the article</a>).

    The Options Tab (<a href="http://livevol.blogspot.com/2010/08/ibkr.html">in the article</a>) illustrates that the Jan'11 14 puts were all opening (compare OI to trade size). Based on today's OI, the Jan'11 15 puts had long interest, so the OI has gone to 77,000+ today.

    What's interesting about this trade is that first, it's premium neutral (sell 1 @ $0.60 and buy 2 for $0.30). Second, the options leg of the trade held a short delta already (~10), but added more short delta with stock.

    <b>Trade Stats</b>
    Sell 50,000 Jan'11 15 puts @ $0.60
    Buy 100,000 Jan'11 14 puts for $0.30
    Sell 350,000 shares IBKR @ $15.90

    The PnL chart is included below (<a href="http://livevol.blogspot.com/2010/08/ibkr.html">in the article</a>).

    The spread loses more than $4.3 million at Jan'11 expo on the long strike. The 52 wk range for IBKR is [$15.32,$20.99]. The PnL at those end points is:

    PnL($15.32) = $203,000
    PnL($20.99) = -$1,781,500
    This trade really looks for IBKR to break through it's annual low, and quite substantially (that is, below $14).

    The PnL at various points down are:
    PnL($10) = $17,065,000
    PnL($11) = $11,715,000
    PnL($12) = $6,365,000
    PnL($13) = $1,015,000
    PnL($14) = -$4,335,000

    Finally, the Charts Tab (6 months) is below (<a href="http://livevol.blogspot.com/2010/08/ibkr.html">in the article</a>). The top portion is the stock price, the bottom is the vol (IV120&#8482 - green vs HV120&#8482 - purple). The yellow shaded area at the very bottom is the IV30&#8482 vs. the HV20&#8482 vol difference.

    <img src="http://1.bp.blogspot.com/_hMry1m7UF10/THZoyWGPleI/AAAAAAAAEW0/fMsUvt6Yy1o/s1600/ibkr_charts.gif" width ="500">

    Note how the IV120&#8482 of ~28 (green line) has shot past the HV120&#8482 of 25 (purple line) of late. Interesting bet on the retail arm of Timber Hill.

    This is trade analysis, not a recommendation.

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

    Legal Stuff:
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