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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