TPX - Bullish Order Flow & a Rewind

Discussion in 'Options' started by livevol_ophir, May 13, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    TPX is trading 35.90, up 2.4% with IV30&#8482 up nearly 5%.

    <img src="">

    I had this ticker on a mental list of stocks that traded with convincing order flow and won to that order flow. For the very quick re-wind of the last time this guy caught my attention (1-27-2010) you can <a href="">go here</a>.

    This is now the second time some pronounced order flow has made my scan, so we'll see how it turns out. This time it's a different bet...

    The company has traded nearly 7,000 options in the first two hours on total daily average option volume of just 968. All but 451 contracts have been calls. The greatest volume is in the May 37.5, Jun 40 and Jun 42.5 calls. 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 are trading on opening positions (compare volume to OI)

    From what I can tell (it's not obvious this time) the trades are:
    1) May 37.5 calls opening purchases ~$0.35
    2) Jun 40 calls opening purchases (ambiguous) ~$0.65
    3) Jun 42.5 calls opening purchases (ambiguous) ~$0.35

    I say ambiguous because the markets are tight so it's tough to see if someone is offering the options down (i.e. selling) or bidding the options up (i.e. buying). When I saw the trades I thought the Jun 40/42.5 was a call spread (buy 40 sell 42.5), but the order flow and prices lead me to believe they're both purchases. Either way, it's a bullish bet.

    The Skew Tab snap (<a href="">full size pic in the article</a>) illustrates clearly which vol is trading.

    <img src="" width = "400">

    From this chart it makes sense that the 40/42.5 would be a spread - buying cheaper vol (40 line) and selling higher vol (42.5 line). It looks like about 2 points in the vol diff. It's not the "normal" case for OTM call skew to swing upward - I actually like the call spread side better than the purchase/purchase at those vols.

    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.

    You can see the stock has basically gone straight up until the market hiccup - has recovered, and is now at a new 52 wk. high.

    This is trade analysis, not a recommendation.

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