Teradyne (TER) - Puts Trade on Stock Pattern. Heading Lower?

Discussion in 'Options' started by livevol_ophir, Sep 21, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    TER is trading $10.46, with IV30&#8482 up 0.5%.

    <img src="http://4.bp.blogspot.com/_hMry1m7UF10/TJkP7oieodI/AAAAAAAAE5U/RGKPYUi_wZM/s1600/ter_summary.gif">

    The company has traded over 7,000 options on total daily average option volume of just 2,160. All but 247 contracts have been puts yielding a 28:1 put:call ratio. The most action was in the Nov 10 puts were over 4,500 contracts traded and in the Oct 11 puts were 2,000 traded. The Stats Tab and Day's biggest trades snapshots are included (<a href="http://livevol.blogspot.com/2010/09/ter.html">in the article</a>).

    <img src="http://2.bp.blogspot.com/_hMry1m7UF10/TJkP-VntK6I/AAAAAAAAE5k/E_fBCqvbQeU/s1600/ter_stats.gif">

    The Options Tab (<a href="http://livevol.blogspot.com/2010/09/ter.html">in the article</a>) illustrates that the Nov puts are entirely opening (compare OI to trade size). This is long interest. You can also see that Nov vol is the highest in the entire chain as it has an earnings cycle. I can't tell what the Oct trading was, but based on the skew tab, I am leaning toward sales.

    The Skew Tab snap (<a href="http://livevol.blogspot.com/2010/09/ter.html">in the article</a>) illustrates the vols by strike by month.

    This is a pretty cool skew chart. We can see the Oct options that traded (highlighted) are the lowest vol in the entire options chain for the first three months. We can also the Nov 11 line (highlighted) and how that vol is substantially above Oct. This feels like buying Nov and selling Oct. As of this writing, that would be selling 42.5 vol and buying 53.

    Finally, the Charts Tab (6 months) is below (<a href="http://livevol.blogspot.com/2010/09/ter.html">in the article</a>). The top portion is the stock price, the bottom is the vol (IV30&#8482 - red vs HV20&#8482 - blue vs HV180&#8482 - pink). The yellow shaded area at the very bottom is the IV30&#8482 vs. the HV20&#8482 vol difference.

    The IV30&#8482 looks pretty fair. The one thing that jumps out at me on this chart is the stock pattern. It has a tendency to peak and crash then repeat with lower peaks and lower troughs. For what it's worth, it's at another possible peak right now.

    This is trade analysis, not a recommendation.

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

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