STRI - Lucky Bet or Cheater?

Discussion in 'Options' started by livevol_ophir, Nov 12, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    STRI is trading $20.41, down 16.8% with IV30™ down 24.7%. The <a href="http://www.livevol.com/">LIVEVOL™ Pro Summary</a> is <a href="http://livevol.blogspot.com/2010/11/stri.html">in the article</a>.

    <img src="http://www.livevolpro.com/help/images/blog/stri_summary.gif" />

    -------------------------------------------------------------------
    <a href="http://www.livevolpro.com/help/free_trial.html"><img height="200" src="http://www.livevolpro.com/help/images/blog/lvp_trial_ad.gif" /></a>

    For a limited time we are offering a FREE real-time trial to Livevol Pro™ for non-professional traders. You can get your trial by following the directions here: <b><a href="http://www.livevolpro.com/help/free_trial.html">Click for Free Trial Offer</a></b>
    -------------------------------------------------------------------

    Jeff Kearns of Bloomberg brought this one to my attention and wrote a great article about it, "Bearish STR Options Surged to Record Before Decline."&nbsp; Basically there was some large put buying on 11-8-2010, just a few days before the recent stock collapse. Let's look at the details...

    First, let's look to the Charts Tab (6 months) is <a href="http://livevol.blogspot.com/2010/11/stri.html">in the article</a>. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

    <img src="http://www.livevolpro.com/help/images/blog/stri_charts.gif" width="600" />

    It's the stock collapse of late that's in question - or the order flow surrounding it, really. The company averages 166 puts traded a day with average put OI of just 1,482. The relevant portion of the Stats Tab is included <a href="http://livevol.blogspot.com/2010/11/stri.html">in the article</a>.

    Now we can turn to the trades on 11-8-2010. I've included the Options Montage from that day and the largest option trades <a href="http://livevol.blogspot.com/2010/11/stri.html">in the article</a>.

    So, in total, ~5,000 puts traded in Nov, Dec 25's and Dec 22.5's. That day 5,366 puts traded or ~ 3,800% of the daily average, and whatta' you know?... The stock has gone from ~$28 to $20 or down 28.5%.

    I'll repeat what I told Jeff, for what it's worth:
    "This is highly coincidental at best, and is foul play at worst. I tend to lean to the latter."

    And yes, I did just quote myself, myself... What? It's Friday...

    This is trade analysis, not a recommendation.

    <b>Follow Live Trades and Order Flow on Twitter: @Livevol_Pro</b>

    Details, trades, prices, vols, skews, charts here:
    <a href="http://livevol.blogspot.com/2010/11/stri.html">http://livevol.blogspot.com/2010/11/stri.html</a>

    Legal Stuff:
    <a href="http://www.livevolpro.com/help/disclaimer_legal.html">http://www.livevolpro.com/help/disclaimer_legal.html</a>