-------------------------------------------------------------------
For a limited time we are offering a FREE real-time trial to Livevol Pro™ for non-professional traders. You can get your trial by following the directions here: Click for Free Trial Offer
-------------------------------------------------------------------
The company has traded 37,000 options on total daily average option volume of just 3,874. The action was in Jan'11 where 10,000+ 55/65 risk reversals traded buy puts/sell calls pay $0.45. Stock volume as about twice the daily average, my guess is these went up with stock, but I'm away from the floor for the next couple of days so I can't tell. The Stats Tab and Day's biggest trades snapshots are included (below).
The Options Tab (below) illustrates that the Jan'11 risky was are mostly opening (compare OI to trade size). The Nov 60 calls feel like sales and are ambiguous to opening/closing. The Nov 65 calls look like purchases and are opening.
The Skew Tab snap (below) illustrates the vols by strike by month. I have only included Jan'11.
Buying puts and selling calls is what the skew is supposed to reflect and I'm not that familiar with how NVS "normally" looks. Nothing in the skew seems irregular to me though.
Finally, the Charts Tab (6 months) is below. 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.
We can see the stock has steadily climbed over the last couple of months. Finally, On the vol side (bottom), we can see the IV30™ has popped past the long term and short term realized.
The Jan'11 trades bought 24 vol to sell 18 vol, contract neutral and paying $0.45 in premium, so it's a little long vega. Looking at the chart we can see:
IV30™: 24.08
HV20™: 13.56
HV180™: 18
So, IV30™ is elevated. Jan'11 is priced at ~21.5 vol, so it's a touch pricey as well. Normally selling the upside gamma in a bio-tech in a takeover bonanza market makes me vomit, but this is a $130 billion company, I don't see many takeover rumors it's future (watch tomorrow there will be like 3 bids or something... just kidding... probably...).
I feel like the vol is elevated, but earnings are coming up in the Nov cycle. If vol rises higher into earnings and hits maybe low 30's, an ATM butterfly or just a short straddle might be an interesting trade to analyze, though risky.
This is trade analysis, not a recommendation.
Follow Live Trades and Order Flow on Twitter: @Livevol_Pro
Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html
I believe it was just a pure hedge in the Jan risk. No stock, traded .425. Seemed like a sale at the time, but buyers surfaced after the print even with stock in the same range.
ReplyDeleteColor from one of the best, Darren Story at Student Options:
ReplyDeleteCOLOR: NVS Jan 55/65 risk trades .50 13k cust bot ref 59.80 stk
Super Broker Mike Bristow of Vtrader Group also hit me up with some color:
ReplyDeleteThe risky you wrote about yesterday just went up another 10k…color: NVS JAN 55/65 risky cust bp and sc, paid .50 13k and crosses