MTG, PMI - Mortgage Insurers' Order Flow into Earnings

Discussion in 'Options' started by livevol_ophir, Mar 31, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    MTG is trading 11.00 with IV30&#8482 up 2.7%. PMI is trading 4.98 with IV30&#8482 up 7.5%.

    Both stocks shot up nicely at the open - the tick charts are included (MTG, PMI respectively).

    <img src="http://2.bp.blogspot.com/_hMry1m7UF10/S7NnGVLrqkI/AAAAAAAABpU/Pus0jwAptqo/s1600/mtg_tick.gif">

    <img src="http://3.bp.blogspot.com/_hMry1m7UF10/S7NnGsN_4PI/AAAAAAAABpc/-BNHHSsT5X4/s1600/pmi_tick.gif">


    Recent News: "Mortgage insurers surge on Obama modification plan" <a href="http://www.marketwatch.com/story/mortgage-insurers-surge-on-obama-modification-plan-2010-03-26?siteid=yhoof2">Read it here.</a>

    MTG has traded over 10,000 options in the first hour and a half on total daily average option volume of just 3,307. All but 910 contracts have been calls. The largest trades have been the Sep 10/12.5 call spread (purchased). The Stats Tab and Day's biggest trades snapshots are included (in the article).

    PMI has traded over 4,000 options in the first hour and a half on total daily average option volume of just 904. All but 195 contracts have been calls. The Stats Tab and Day's biggest trades snapshots are included (in the article).

    The MTG Options Tab (in the article) demonstrates that the Apr call volume is smaller than the OI. A little order flow analysis shows the Apr 7.5 calls are purchases today on top of long OI - the trades today are also opening. The Apr 10 calls are sales today on long OI - these are closing sales. Note also the large OI in some of the other calls.

    The MTG Skew tab illustrates the bend upward in the May OTM calls - keep in mind, earnings are in May. I have included it in this post. PMI is in the article.

    <img src="http://4.bp.blogspot.com/_hMry1m7UF10/S7Nlg5yDEAI/AAAAAAAABo0/pgTk-hV8DtU/s1600/mtg_skew_33110.gif" width = "500">

    The PMI Options Tab (in the article) demonstrates that the Jun and Sep 5 call volume is smaller than the OI. The same analysis shows these purchases are on top of long OI - the trades today are also opening. Note also the large OI in some of the calls.

    Just like MTG - the PMI Skew tab illustrates the bend upward in the May OTM calls - keep in mind, earnings are in May for PMI as well.

    Finally, the Charts Tab (6 months) for MTG and PMI respectively are included (in the article). 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 IV60&#8482 vs. the HV30&#8482 vol difference.

    Note the recent run up in both.

    So there are call buyers on high volume, growing OI in some long calls, a bend in the upside earnings skew and a stock run up with earnings to come. A contrarian: "SOLD!" A momentum trader: "BUY 'EM!" Which are you?...

    This is trade analysis, not a recommendation.

    Details, charts, skews, prices, trades, vols here:
    http://livevol.blogspot.com/2010/03/mtg-pmi.html
     
  2. nitro

    nitro

    Very nice. Your tools are really attractive and useful, and your comments are right on the money.

    Once thing that I suggest in your comments and on your website is, have a two day charts of both the equity and the vola. That way we can see the level changes from yesterday to today.

    Volume on the options would be nice as well. So your charts would be wider, two days, and taller, options volume.
     
  3. livevol_ophir

    livevol_ophir ET Sponsor

    Thanks for the comments. We actually do have all that - 1,2,5 day ticks for underlying and vol together. 1 day - 2year (by day) stock and vol with option volume, call/put breakdown and more than 1000 different permutations of vol. :cool:

    Forgive the blatant marketing but - here's a quick movie I recorded with the entire site: http://www.livevolpro.com/help/movies/all_movie_short/all_movie_short.html
     
  4. nitro

    nitro

    Very very nice.

    Does the scanner work only on realtime data, or does it work on historical data as well?

    A few suggestions.

    1) In the skew chart, show a delta skew chart. So the x-axis is delta, not strike.

    2) This is a big one. Allow dynamic scanning scripts not just canned scripts so that I can build my own model and then scan for those conditions in the scanner. If that "script" follows certain guidelines, then it should be displayable in chart view or stats view or whatever on your front end anywhere. Being able to program the model using C#, or F#, etc would be great.

    3) Finally, you should allow some way for third party developers to be able to gain revenue through your platform. That way, say I develop a model/scanner as in point two above. I want to lease it. A client should be able to choose my tool and given payment, my tool would be available to the client to use. You get more subscribers, the end user gets a great interface and hopefully a useful model, etc, and we all make money.
     
  5. livevol_ophir

    livevol_ophir ET Sponsor

    1. Working on it.
    2. We offer dynamic scanning and custom scans - but through our Data Services division. We have a number of prop shops/hedge funds, etc using custom scans.
    3. We'll consider it - thanks for the feedback :cool:
     
  6. nitro

    nitro

    Does the scanner work on historical data as well as realtime data?
     
  7. livevol_ophir

    livevol_ophir ET Sponsor

    Depends on the scan. Having said that, every scan can be made historical if you go through Data Services - then it's just your customization. We also have an Excel Real-time plug in. Take a look at the website: http://www.livevol.com/

    Poke around - if you have questions feel free to contact us (phone, email).