WBC - Bet on Stock Dive on Stock Rally

Discussion in 'Options' started by livevol_ophir, Jun 18, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    WBC is trading 34.70, up 6.3% with IV30&#8482 up 8.1%.

    <img src="http://3.bp.blogspot.com/_hMry1m7UF10/TBu40pcH1RI/AAAAAAAADFo/8WlCe1pZLro/s1600/wbc_summary.gif">

    The company is a provider of electronic, mechanical and mechatronic products for the commercial truck, trailer, bus and passenger car manufacturers.

    The company has traded over 6,293 options on total daily average option volume of just 251. The action is in July; put buyer and call spread seller - both short deltas. The Stats Tab and Day's biggest trades snapshots are included (<a href="http://livevol.blogspot.com/2010/06/wbc.html">in the article</a>).

    The Options Tab (<a href="http://livevol.blogspot.com/2010/06/wbc.html">in the article</a>) illustrates that all the lines are mostly opening (trade volume >> OI). From what I can see, the puts are both purchases, the 35 calls are sales and the 40 calls cover that up.

    The Skew Tab snap (<a href="http://livevol.blogspot.com/2010/06/wbc.html">in the article</a>) illustrates the vols by strike by month. I have highlighted the four strikes in play. The skew looks pretty normal.

    Finally, the Charts Tab (6 months) is below (<a href="http://livevol.blogspot.com/2010/06/wbc.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.

    You can see the stock has risen sharply recently. Its 52 wk range is [$16.00, $36.92], so it's approaching that high. The trades today are bearish and long vol. Also note that the HV20&#8482 (blue line) has dipped below the IV30&#8482 (red line) as the stock has jumped. So this trade is buying "cheap" vol ceteris paribus and betting on a stock reversal. Note the vol is UP today even with the stock price gain.

    This is trade analysis, not a recommendation.

    Details, trades, prices, vols, skews, here:
  2. 1) That is "greeker" than delta, gamma, vega et al. :cool:
    2) When is the takeover announcement? :eek: