EWH (Hong Kong ETF) - Huge Bet on a Downturn in Hong Kong

EWH (Hong Kong ETF) is trading 14.91 with IV30™ down 5.6%. The LIVEVOL™ Pro Summary is below.



The ETF has traded over 16,000 options on total daily average option volume of just 2,988. All but 150 contracts have been puts. The largest trade was 15,000 Dec 14 puts bought for $0.75 on a 34 delta against $14.92 stock. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).






The Options Tab (click to enlarge) illustrates that the puts are opening (compare OI to trade size). You can see almost nothing else has traded today; just 16,000 puts - of which 15,000 were a single trade.



Trade Stats
Buy 15,000 Dec 14 puts for $0.75
Buy 15,000*100*.34 = 510,000 shares of stock for $14.92
Max Loss (at $14) -$1,594,200
Breakeven Low: $12.39
Breakeven High: $17.12

This is a lopsided straddle (~2 puts for every 1 call). It gets long $55,500/vol (i.e. vega). So, this is a vol bet as much as it is a bearish straddle. Someone is betting on a hard downward move in Hong Kong.

The Skew Tab snap (click to enlarge) illustrates the vols by strike by month.



This is exactly why skew charts are cool. We can see clearly how the customer buying interest has shot the vol in the Dec 14 puts above the other months while the Dec 13 puts are below the other months.

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.



It sort of looks like a reverse chart of the VIX from the earlier post. Vol is above the historical, the price has dipped recently and a huge vol buyer just stepped in.

This is trade analysis, not a recommendation.

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RTH (Retail ETF) - Betting on Retail Stock Recovery After Collapse

RTH (Retail ETF) is trading $86.91 with IV30™ down 2.4%. The LIVEVOL™ Pro Summary is below.



Let's start with the Charts Tab (6 months) is (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.



We can see retail has been pounded recently; down from $107.71 on 4-26-2010 to $86. That's over 20% in two months in a sector ETF. In that same time, the IV30™ has jumped 12.37 points, from 17.67 to 30.04 or 70%. You can see just as the stock drops (top chart), the IV30™ (red line) starts to climb (bottom chart).

Today the ETF has traded over 10,000 options in the first two hours on total daily average option volume of just 3,234. Two large trades have come in. The first was an 8,000+ lot (in two prints) to purchase Aug 90 calls. The second was a 1,250 lot sale of the Aug 90/95 strangle. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).





Trade Stats
1. Strangle with stock gets short vol and LONG delta
Buy $87.05 stock on 45 delta (56,250 shares)
Sell 1,250 Aug 90 puts @ $5.30
Buy 1,250 Aug 95 calls @ $0.60
Max gain at $95: 1,184,688
Breakeven Low: $85.01
Breakeven High: $112.23
The PnL chart is included (click to enlarge):



2. Buy 8,150 Aug 90 calls for $2.275
This trade gets long delta as well, though it is also long vol (long options).

The trades together buy delta (get long) and win to the stock above $92.50 (ish)

The Skew Tab snap (click to enlarge) illustrates the vols by strike by month.



The skew is pretty normal looking. Keep in mind the Aug 90 calls were bot and sold, so a kink shouldn't necessarily develop.

All told, the high vol was sold with the strangle, and both trades get long the ETF which has collapsed of late.

This is trade analysis, not a recommendation.

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VXX (VIX Short Term) - Vol Up, But Vol of Vol Not in Panic Mode... Yet

VXX (VIX Short-Term ETN) closed at 30.79 up 9.3% yesterday. The LIVEVOL™ Pro Summary is below.



The Tick Chart snap (click to enlarge) illustrates a late climb in the index with a corresponding climb in front month IV. Notice also a bit of choppiness near the close.



The ETN traded over 30,000 options on total daily average option volume of just 6,611. The largest trades in order were: Jul 30 calls 1,366x bot, Jul 30 calls 1,255x bot, Aug 27 put sales, Jul 30 call sales, Jul 30 and 32 call purchases. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).





Most of the trades are long the VXX and long premium (i.e. long the vol of vol).

The VIX (not VXX) Charts Tab (6 months) is below (click to enlarge). The top portion is the index spot, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.



You can see the literal "V" shaped chart on top. On the bottom (vols), notice that the IV30™ for the VIX is still below the HV20™.

Now let's look at the VXX (click to enlarge) Charts Tab (6 months).



You can see the "V" is almost identical to the VIX. The VXX IV30™ however (~79) is in fact greater than the HV20™ (~69). Fears of Europe have crept back, but the uncertainty isn't as great as it was a few months ago. It seems like the market participants see Europe as potentially bad news, but somehow not catastrophic. I guess we'll see. Keep an eye on the IV30™ of the VIX, if it spikes again, panic mode is starting and huge down days can ensure on not necessarily huge news. It also might be an opportunity to sell the VIX vol even if you're staying short the broader market.

On a side note, with the Dow Jones Industrial Average below 10,000, I remember the first time it went over that number. I was a young pup at PaineWebber (now UBS). That was March 29, 1999. More than 11 years later, we're still here.

This is trade analysis, not a recommendation.

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Comerica (CMA) - Fair Value Reporting Rules Coming; Rating Agency Claims Bearish for Banks

CMA is trading $37.13, down 3.8% with IV30™ up 15.5%. The LIVEVOL™ Pro Summary is below.



Comerica Incorporated (Comerica) is a financial services company. Comerica operates through three business segments: the Business Bank, the Retail Bank, and Wealth & Institutional Management.

Right now a proposal by the Financial Accounting Standards Board (FASB) would require banks to report loans and other financial instruments on its balance sheet at "fair value." (reference: Investopedia; Author: Eric Fox). You can read the whole article By Clicking Here. I'll summarize below.

This fair value thing, in my opinion, will continue to grow in importance and garner more headlines as the details are hammered out. Basically Fitch (the rating agency, eh hem) released a study that declared over $130 billion in market cap would have been lost by the twenty banks studied if the proposal had been put in effect in Q3 of '09. This represented ~ 14% of total cap.

So, in their eyes, this would take the financial sector - banks specifically, down pretty hard. Of course, an "efficient market" believer would say that the conclusion makes no sense given that the data is publicly available (to a great extent). I guess I just see it pretty simply. Banks do great things - without our banking system the US would not be what it is today. But...

... They're also Dirty Rotten Scoundrels (love that movie).

For this article, I'll just focus on one of the banks that this could effect, a smaller one - CMA.

First, the tick chart is included (click to enlarge).



We can see the front month vol (bottom chart) spiking as the stock tumbled (top chart).

The company has traded over 22,000 options on total daily average option volume of just 4,692. All but 607 contracts have been puts. The largest trade has been an Aug 32.5/37.5 put spread purchase 7,500x (i.e. 15,000 contracts). The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).





The Options Tab (click to enlarge) illustrates that the puts are opening (trade volume >> OI). Note also that earnings are projected for the start of the Aug cycle (though they may slip into July). The 5,000 July 40 puts are sales on 10,000 long OI (best I can tell). In other words, they're closing, while the put spread is opening.



Trade Stats
Buy 7,500 Aug 37.5 puts for $2.50
Sell 7,500 Aug 32.5 puts @ $0.80
Debit: $2.50 - $0.80 = $1.70
Total Cost: 7,500 * 100 *($1.70) = $1,275,000
Max Gain (Stock <= 32.5 at expo): $2,475,000

The Skew Tab snap (click to enlarge) illustrates the vols by strike by month.



You can see a normal lookin' skew. July is pretty steep as there is a nickel bid in the 30 puts.

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.



The 52 wk. range for CMA is [$19.94, $45.84]. The spread bets on the stock going below $36 (ish). You can see the IV30™ is just now spiking past the HV20™.

This is trade analysis, not a recommendation.

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Plains Exploration (PXP) - Risk Reversal Gets Long US Oil Explorer

PXP closed at $20.95 yesterday down $0.73 with IV30™ up 2.85 points. The LIVEVOL™ Pro Summary is below.



PXP is an independent oil and gas company engaged in the activities of acquiring, developing, exploring and producing oil and gas properties primarily in the United States.

This is the second recent blog I posted on a long position in an Oil Explorer. Noble (NE) - July Call Buyer Pushes Vol; Click to Read

The company traded over 32,000 options on total daily average option volume of just 7,053. 20,000 contracts went up in one position; a Nov 17.5/22.5 risk reversal (buy calls/sell puts). The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).





The Options Tab (click to enlarge) illustrates that the both the calls and the puts were opening (trade size >> OI).



I don't see a position with OI > than 1,257 in Nov, so the 10,000 on both those lines is quite substantial. In the front three months, I don't see any OI even at 5,000 (Aug 22 puts have 4,815 open positions). The stock averages 3.89 million shares traded a day, and yesterday only 2.2 million traded. It doesn't look like these were done with stock; i.e. they kept their delta ~72 delta long.

Trade Stats
Sell 10,000 Nov 17.5 puts @ $1.30
Buy 10,000 Nov 22.5 calls for $2.45
Debit = $2.45 - $1.30 = $1.15
Total Cost = 10,000 *100 * ($1.15) = $1,150,000
Break Even (at expo) = $22.5 + $1.15 = $23.65

The Skew Tab snap (click to enlarge) illustrates the vols by month by strike.



As of the close, the skew in Nov looked normal, as do the other months. If anything, July looks sort of bid to the downside.

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.



We can see the stock dropped pertty hard from ~$35 to it's current level since early May. The 52 wk range is [$19.28,$36.60]. The trade makes money above $23.65.

This is trade analysis, not a recommendation.

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Hasbro (HAS) - Stock Pop on Takeover Rumor and Call Purchase

HAS closed at $43 on Friday, up $1.21 from its intra-day low of $41.79. The LIVEVOL™ Pro Summary is below.



At ~10:52 EST the stock hit its low, then abruptly turned higher. The Tick Chart snap is included (click to enlarge).



The company traded over 7,400 options on total daily average option volume of just 1,355. The largest trade was a 3,434 lot Aug 47.5 call purchase about thirty minutes into the stock rise. Calls traded on a 19:1 ratio to puts. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).




The news broke of a potential buyer. The company quickly responded:
Hasbro Inc said it is not involved in any talks regarding a potential sale of the company, despite a news report that said it had been in negotiations for a possible leveraged buyout.

The No. 2 toymaker s shares rose as much as 9 percent in pre-market trading after the Wall Street Journal reported that it was in early negotiations with Providence Equity Partners to take the company private.

Hasbro confirmed it was approached by a private equity firm regarding a transaction, but it did not name the firm and its board had decided against pursuing it.

A source familiar with the matter told Reuters on Thursday Providence has had talks with the No. 2 U.S. toymaker. Providence was unavailable to comment.

So a "denial."

The Options Tab (click to enlarge) illustrates that the Aug 47.5 calls are mostly opening (compare OI to trade size). You can also see earnings are in that cycle.



I don't see an OI even in the two thousand range, so the 4,500 total of the Aug 47.5 calls that traded are significant.

The Skew Tab snap (click to enlarge) illustrates the vols per strike per month. You can see the slightly kinked up skew right on the July 47.5 line. It's a little surprising that the Aug 47.5 calls didn't react more severely. Seems like a call spread could set up if you don't think anything is happening in July.



Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.



We can see the stock popped on earnings in late Jan, and since then has steadily risen. We'll see how this plays out, usually just a bunch of saber rattling. But then again, if someone bids for the company, the stock should jump, regardless if the company is "interested."

This is trade analysis, not a recommendation.

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*UPDATE BP PLC (BP) - Premium Buyers Push Exploding Vol on New Stock Lows

**** UPDATE

BP is trading $27.07, down 5.8% with IV30™ up 14.0%. The LIVEVOL™ Pro Summary is below.



This is an update from the blog yesterday:BP Plc (BP) - Is Reckoning Day Upon Us?.

I noted yesterday that BP had hit it's 52 wk low of $29 and was hovering just above it. I felt like yesterday was "line in the sand" day, and if it broke the low, it could mean some downward momentum in the stock. Today it seems that in fact BP has broken out lower.

I wrote:
-------------
You can see the "line in the sand." Is BP going to fall apart (further)? In the short term, it seems like reckoning day will be soon upon us.

The IV30™ 52 wk. range is [20.05, 117.27]. Note that while the stock is near it's low, the IV30™ is not near its high.
-------------

A few note worthy things today:
1) Vol is in fact exploding.
2) The stock has gone through the low.
3) People are buying millions of dollars of premium, but...

The surprise is this. See the Stats Tab and day's largest trades snaps (click to enlarge).





While Net Premium is up, you can see it's mostly in the calls. The 5 largest trades so far today are:

Call Purchase
Put Sale
Call Sale
Call Purchase
Put Sale

Yesterday the massive trades were bearish. Interesting how the order flow has turned bullish in options today, as the stock goes down and vol jumps. I would NOT take today's action as a big signal. It has to repeat to change teh overall sentiment (in my opinion).

Finally I have included a full vol chart for the last 6 months (click to enlarge). red is IV30™, blue is HV20™. The yellow shaded area is the vol dif (IV - HV).



Notice that the implied vol is still considerably below the actual movement of the underlying. Hmm...

This is trade analysis, not a recommendation.

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Noble (NE) - July Call Buyer Pushes Vol

NE is trading $29.20, up 2.6% today with IV30™ up 11.7% with a stock rise. The LIVEVOL™ Pro Summary is below.



Noble Corporation (Noble) is an offshore drilling contractor for the oil and gas industry. To fully understand this stock, you have to read the drilling moratorium news/rumors.

The company has traded over 31,000 options in the first two hours on total daily average option volume of just 7,628. Calls have traded on a 13:1 ratio to puts. The largest trades are in the July 30 calls where nearly 23,000 have traded (pre-dominantly purchases). The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).





The Options Tab (click to enlarge) illustrates that the July 30 calls are mostly opening (compare OI to trade size). You can also see that July vol is above Aug. Projected earnings are just after July expo, I'd be careful with that projection, as it looks like earnings may slip into the end of July based on the vols.



The Skew Tab snap (click to enlarge) illustrates the vols per strike per month. You can see the slightly kinked up skew right on the July 30 line. I'm actually surprised the entire upside skew hasn't changed shape given the size of the volume on that line. You can also see a weird kink upward at the end on the upside, the July 33 line.



What we can see is overall vol is up sharply today (11.7% or 5.41 vol points). That does make sense given the order flow. i.e. people are buying premium in July.

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.



We can see the stock went down hard recently, then recovered and now doesn't know what it wants to. The IV30™ has just passed the HV20™. The stock averages 7.7 million shares a day, and 4.6 million have traded hands so far. I don't see any strong evidence that these calls were done with stock (i.e. turned into straddles or puts). It feels like naked upside with vol jumping.

This is trade analysis, not a recommendation.

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Ares Capital (ARCC) - Huge Downside Put Buyer on "Mezzanine Debt" Holder

ARCC is trading $13.37, with IV30™ up 5.9%. The LIVEVOL™ Pro Summary is below.



Ares Capital Corporation is a specialty finance company. It invests in United States middle-market companies. It invests primarily in first and second lien senior loans and mezzanine debt.

That sounds like a nice safe business right?... Well, the first lien part at least...

The company has traded over 10,400 options on total daily average option volume of just 2,238. 10,200 of the options are July 12.5 and Aug 12.5 put purchases. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).





The Options Tab (click to enlarge) illustrates that the puts are mostly opening (compare OI to trade size). You can also see that the front month (where the trades are) vol is the lowest vol of the other months.



The average stock volume is ~1.7 million shares. Today 953k have traded thus far. I don't have any reason to believe these were done with stock (but that doesn't mean they weren't). If you look to the biggest trades snap (above), you can see these are auto exec or regular. In other words, non negotiated. For the July puts (the 8,600+), someone paid $0.30 vs a $0.15 - $0.30 market. That's paying up quite a bit on some baby puts for size.

The largest individual holder has just 140,000 shares according to Yahoo! Finance. There is an institution with 8 + million (Vanguard). If these trades are a hedge, it's an institution.

Finally, the Charts Tab (12 months) is below (click to enlarge).



We can see the stock has been quite a bit lower. The 52 wk range is [$6.95, $16.55]. Since this is supposed to be an "income generating" closed end fund, it could make sense for Vanguard to hedge its position one to one. No other holder (individual or institution) has enough shares to make this put purchase be a hedge 1:1 (i.e. too many puts traded).

This is trade analysis, not a recommendation.

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