MNI - Enormous One-Sided Vol Order Flow and Vol Explosion

Discussion in 'Options' started by livevol_ophir, Jul 16, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    MNI is trading $3.47, down 7.7% with IV30&#8482 up 17.5%.

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    MNI is a hybrid print and online, news and advertising company. The Company’s newspapers range from the dailies serving metropolitan areas to non-daily newspapers serving small communities.

    The company has traded over 13,000 options on total daily average option volume of just 508. Zero (0) puts have traded; the order flow is entirely call buying in Aug and Jan '11. The Stats Tab and Day's biggest trades snapshots are included (<a href="">in the article</a>).

    The Options Tab (<a href="">in the article</a>) illustrates that the Aug 4 (5,000 traded) and Jan '11 5 (8,558 traded) are opening (compare OI to trade size). Note also that there isn't a single OI on any line as large as either of these trades. You can see that IV is up 17.3 points in August and 13.2 in Jan '11.

    The largest trade was the Aug 4/Jan '11 5 call stupid (bot/bot) against 280,000 stock (sold) @ $3.48. Mike Bristow, master Broker of Vtrader Group, helped me out with the color. This is one sided vol purchase all the way; an expectation that MNI moves below the $2.5 range or above $6 in the next few months. It's almost a bet on a big turn back to the high levels, or a bankruptcy. The vol explosion is a reaction to the order flow.

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

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    It's pretty odd. Rather than the Aug 4 line bending up (where the order flow was), it's the Aug 5 line that's bid up. Same thing in Jan '11. It's the Jan '11 6 strike that's kinked upwards, not the Jan '11 5 (where the order flow is). You could actually take one side of the delta bet, but spread it off by selling <i>higher</i> vol calls that are <i>more</i> OTM.

    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&#8482 - red vs HV20&#8482 - blue). The yellow shaded area at the very bottom is the IV30&#8482 vs. the HV20&#8482 vol difference.

    Two obvious things I've highlighted on the chart:
    1) The stock was as high as $7.16 on 4-21-2010 and then fell apart on earnings.
    2) The IV30&#8482 is spiking and is more than 40 points higher than the HV20&#8482.

    Through all this, the stock volume is just 1.2 million, below the average of 1.8 million. So there's crazy option volume (~2,700% of normal) and less than average stock volume.

    This is trade analysis, not a recommendation.

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