PFG - Call Buyers, Vol Movers

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

  1. livevol_ophir

    livevol_ophir ET Sponsor

    PFG closed at $22.51, down 3.0% with IV30&#8482 UP 10.2%.

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    PFG caught my eye a few days ago; those of you that follow me on Twitter saw that tweet (@Livevol_Pro). Combined with the action yesterday, it felt ready for a full post.

    The company traded over 12,500 options on total daily average option volume of just 1,134. All but 82 contracts were calls. The largest trades look like purchases of the Oct 25 calls ~11,500 times. 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 OI in those calls is considerably larger than the trade volume.

    On 8-27-2010 the OI jumped in those calls from ~300 to over 20,000 (so the trades were 8-26). The Livevol Pro Level II pop out is included below (<a href="">in the article</a>).

    Looking to the Time & Sales Tab on that day for those calls, I found large purchases. The largest trades (>= 100) are included (<a href="">in the article</a>).

    So in the last five days, over 30,000 long OTM calls have been opened in Oct in a stock that averages 789 calls a day (from the Stats Tab).

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

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    Check out the vol difference between the Oct 25 and Sep lines. The buying interest has pushed the vol up in Oct, but the lack of interest in Sep has kept that month low.

    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.

    We can see the IV30&#8482 has risen as the stock has come off recent lows; in other words, there has been buying interest in PFG premium even as the stock has moved up. A 5 point vol diff between the IV30&#8482 and HV20&#8482 has opened up. The HV180&#8482 is 40 compared to IV30&#8482 of 43 (ish), so the vol doesn't scream sale.

    <b>Possible Trades</b>
    If you like the order flow you could analyze an Oct 24/25 call spread and fund that with either a Sep 21 or Oct 18 put sale naked. That leaves you premium neutral and long deltas. The Sep trade yields a ree call spread if the stock stays above $21 for the next two weeks. You could also buy naked the Oct 25 calls if you felt it to be "smart" money. But ya know...

    This is trade analysis, not a recommendation.

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

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