SHFL - Vol Ripping on Spec Order Flow

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

  1. livevol_ophir

    livevol_ophir ET Sponsor

    SHFL is trading $9.29, up 4.6% with IV30™ up a whopping 39.8%. The <a href="">LIVEVOL™ Pro Summary</a> is <a href="">in the article</a>.

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    Jeff Kearns at Bloomberg showed me this one. This feels like spec play on a takeover... Let the bonanza <s>begin</s> continue.

    The company has traded 10,000 options on total daily average option volume of just 265. The action is in the Nov 9 and 10 calls where over 9,000 have traded total. The Stats Tab and Day's biggest trades snapshots are included (<a href="">in the article</a>).

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    The Options Tab (<a href="">in the article</a>) illustrates that the Nov 9 calls are mostly opening (compare OI to trade size). Doing a little homework, I believe the OI in the Nov 10 calls is long. With vol and stock up, this feels like opening call purchases.

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

    Not surprisingly, the upside skew in Nov is bent up to reflect the long premium interest in the upside calls.

    Finally, the Charts Tab (6 months) is <a href="">in the article</a>. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

    We can see the stock sort of bounces around and is nearing it's peak "resistance." Keep in mind the 52 wk high is $10.19, so the Nov 10 call purchases for $0.35 (ish) bet on a new annual high within the next few weeks. More notable, the vol - check out the IV30™ spike. Pretty impressive.

    I don't have a lot of trading ideas here other than a Nov 9/10 call spread if it can be done for &lt;= $0.50. This trade is still just a bet, but I feel like it's a touch better than 1:1 with stock up around $9.30. Either way, I'm not super motivated to play this, but what the hell do I know?...

    This is trade analysis, not a recommendation.

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