VMED - Options Action Jumps

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

  1. livevol_ophir

    livevol_ophir ET Sponsor

    VMED closed at $20.61 yesterday.

    <img src="http://3.bp.blogspot.com/_hMry1m7UF10/TGVH_lkdkaI/AAAAAAAAEEU/srVQ7AY6m4I/s1600/vmed_summary.gif">

    The company traded over 33,000 options on total daily average option volume of just 3,162. Three large trades made up this volume:
    1) 7,000 Aug 22.5 call purchases for $0.05
    2) 7,000 Sep 20 straddle sales @ ~$2.12
    3) 5,000 Jan '11 22.5 call purchases for $1.15
    The Stats Tab and Day's biggest trades snapshots are included (<a href="http://livevol.blogspot.com/2010/08/vmed.html">in the article</a>).

    <img src="http://4.bp.blogspot.com/_hMry1m7UF10/TGVIAYbvDkI/AAAAAAAAEEk/5W2iubWXckI/s1600/vmed_stats.gif">

    The Options Tab (<a href="http://livevol.blogspot.com/2010/08/vmed.html">in the article</a>) illustrates the action more clearly. Every trade was opening other than the Sep 20 calls.

    These trades probably weren't done by the same entity, though they all do agree on limited downside movement (call purchases and vol sale).

    Finally, the Charts Tab (6 months) is below (<a href="http://livevol.blogspot.com/2010/08/vmed.html">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.

    The IV30&#8482 and HV20&#8482 track pretty well (actually, very well), so I'm not in love with the straddle sale. The $2.12 sale makes money on Sep expo. if VMED is in the range ($17.88,$22.12). The 52 wk. range is [$10.03, $22.45]. The call purchases are a bit odd as well. Not sure what the Aug purchases are about, and the Jan vol feels very "fairish" at best with HV120&#8482 at 39 and IV120&#8482 at 42. I'd probably rather sell that if anything at all.

    Lots of action, no real great trade in my eyes based on the vols and chart. If a takeover happens in the next week, then watch for some angry $0.05 call sellers. But, I wouldn't bet on it.

    If lookng for a trade in this one, a Sep vol purchase (opposite of order flow) looks ok if you can get prices on the liquidity from the other side. Maybe a Sep 20/22.5 1 x 2 call spread for less than $1. Maybe buy some Sep 25 calls to cover in case there really is a takeover.

    This is trade analysis, not a recommendation.

    Details, trades, prices, vols, skews, charts here:
    http://livevol.blogspot.com/2010/08/vmed.html
     
  2. Those trades don't make sense as a group. 7000 Aug calls only limits the upside blowout of the straddle, but does nothing past Aug expiration. The 7000 calls wouldn't be part of a long synthetic put, as it's too DITM. Weird.
     
  3. livevol_ophir

    livevol_ophir ET Sponsor

    yeah; all over the place, agreed. I don't believe those calls .05 were turned into puts; agreed on that as well.