Friday, January 15, 2010

Total Systems (TSS) - Earnings Vol and Puts

TSS is a $3 billion global commerce solutions company. Note the earnings date is 1/20/2010 AMC. The LIVEVOL™ Pro Summary is below.

The company has traded over 2,300 puts today in the first three hours on total daily average option volume of just 211. The Company Tab snapshot is below (click the image to enlarge).

The trading action is in the Feb 15 puts - over 2,100 have traded; purchases for 0.15 and 0.20. Note the OI (open interest) is just 61 - these are opening put purchases less than a week before earnings. The day's biggest trades and Options Tab snapshots are included below (click either image to enlarge).

From the Summary above you can see that the historical vol has beeen around 13 (HV10™, HV20™ and HV30™) while the IV30™ is over 30. The day's biggest trades snapshot demonstrates that these puts were trading 36-40 vol. The Charts Tab snapshot is included below for reference - notice the divergence between HV10™ (white line), HV20™ (blue line) and the IV30™ (red line).

The Charts Tab snapshot also illustrates the gap down in stock price after last earnings release. The Earnings & Dividends tab illustrates that on the 4/28 and 7/28 earnings cycles, the ATM straddles actually moved up - i.e. underlying moved so much a back spread was a winner. The 1/27 and 10/27 cycles were the opposite - front spreading was a winner.

Note that the Feb ATM straddle mid market value is 1.20 + 0.25 = 1.45. vs stock at 16.59. So parity is 17.5 - 16.59 = 0.91. So the straddle is trading 1.45 - 0.91 = 0.54 over. The 15 strike is 1.59 away and 1.74 away from breakeven on a 0.15 purchase.

This isn't trade advice just analysis. Read legal below.

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