Friday, September 10, 2010

Hartford (HIG) - Sep Calls Trade Size; Skew Turns Huge

HIG is trading $22.93, up 2.7% with IV30™ 17.1%. The LIVEVOL™ Pro Summary is below.

The company has traded over 64,000 options on total daily average option volume of just 8,502. The action is in Sep calls, with over 40,000 trading in the front month, yielding a 13:1 call:put ratio. 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 calls are all mostly opening (compare OI to trade size). I'm actually not quite clear if it's buying/selling, but the vol is jumping and the skew is aggressively bent.

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

Note the Sep upside skew is wildly bid. The Sep 29 calls are $0.06 bid, or 101 vol on ATM vol of just 48.5 in Sep. The Sep 25 calls are 64 vol, which is still well above ATM, but also demonstrates how steep the reverse skew is.

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 vs. HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

So they IV30™ is popping but still below the short term realized move. Both short term realized (58) and IV30™ (52) are well above the long term HV of 44.

As far as I can tell, there is some Dutch auction for some deep warrants going on. Warrants increase the float.

Possible Trades to Analyze

First, make sure to understand the auction and the warrants. Second... do the same thing again. Selling the upside in Sep covering with something, whether that's Sep lower calls or doing it in Oct seems like a reasonable bet to analyze.

This is trade analysis, not a recommendation.

Legal Stuff:


  1. So, what does it suggest/mean?

  2. Upside risk is more serious than downside for the next week of trading.