TRW Automotive (TRW) - Puts Trade, Depressed Vol to News, Earnings & Stock Drop

TRW is trading $55.15, down 7.3% with IV30™ up 7.9%. The LIVEVOL® Pro Summary is below.



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TRW Automotive Holdings Corp. (TRW Automotive) is a diversified supplier of automotive systems, modules and components to automotive original equipment manufacturers (OEMs) and related aftermarkets.

The stock has some interesting news:
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TRW Automotive (TRW) announced that on June 7, 2011 certain of the co's Occupant Safety Systems business unit locations in Germany received requests for information from European antitrust authorities in connection with an investigation. A related request was made in the United States.
Provided by Briefing.com (www.briefing.com)
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Tricky...

I'm not sure why the stock is down today, but there is some bearish order flow to go along with the popping vol and dropping stock. The company has traded over 4,800 contracts on total daily average option volume of just 689. Puts have traded on a 12:1 ratio to calls with the largest trade being an Aug 45/50 puts spread bot for $0.675 on ARCA 2,000x. Color provided by Mike Bristow of Vtrader Group. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the puts are mostly opening (compare OI to trade size). This is a bet that TRW dips below $50 by Aug expiration (or that vol pops). The 52 wk range for TRW is [$28.04, $63.26].



The Skew Tab snap (below) illustrates the vols by strike by month.



We can see that the downside for Jul and Aug lie on top of each other. The upside calls are actually slightly higher vol than the ATM at the 65 strike in Aug.

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).





I've highlighted the stock drop today, which is pretty significant. More interesting to me, I've included a blown up vol chart as the second image. While IV30™ is elevated to the historical measures (note that HV20 will update on the close -- so it's going to pop as well), it still feels sort of low.

(1) Earnings are due out in early Aug , (2) the stock has gapped more than 7% today and (3) there's some litigation "thing" going on. The 52 wk range in IV30™ is [29.75, 60.62]. In English, the IV30™ is in the 18th percentile (linear interpolation) for the year range -- i.e. low. Hmmm...

This is trade analysis, not a recommendation.

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