SGEN - Drug Trial Vol Pops in Dec; Risk Reversal Trades

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

  1. livevol_ophir

    livevol_ophir ET Sponsor

    SGEN closed at $12.48, up 2.8%. Earnings are due out 7-27-2010 AMC.

    <img src="">

    The company traded over 8,000 options on total daily average option volume of just 435. The action was in the Dec options; a Dec 10/15 risk reversal (buy puts/sell calls) 4,000x. 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 calls and puts are mostly opening (compare OI to trade size). We can also see that Dec vol is 93 compared to Aug (63) and Sep (72).

    On Tuesday, SGEN announced the start to a new pancreatic cancer drug trial. I haven't verified it, but it seems like there is an expectation for results out in the Dec options cycle. This bet is bearish.

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

    This is a great view of how much higher Dec vol is relative to Sep indicating an expectation that a vol event will occur in the Dec cycle, but not in the Sep cycle. I've highlighted the strikes that were traded.

    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 (IV90&#8482 - green vs HV90&#8482 - purple). The yellow shaded area at the very bottom is the IV30&#8482 vs. the HV20&#8482 vol difference.

    SGEN has traded in a tight range recently and is up from the $9 range six months ago. Note the difference int he IV90&#8482 which is ~85 (green line in the bottom chart) compared to the HV90&#8482 which is ~51 (purple line in the bottom chart).

    This is trade analysis, not a recommendation.

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