Thursday, February 25, 2010

Atlas America (ATLS) - Bull Bets Are in on Risky

ATLS is trading 31.74 with IV30™ up 5%. The LIVEVOL™ Pro Summary is below.

The company has traded over 5,000 options today in the first 30 minutes on total daily average option volume of just 347. Yesterday the company traded over 10,000 contracts. Today essentially all the volume has been the Jun 35 calls purchases - yesterday, 5,000 were also purchased and funded with a 5,000 sale of Jun 30 puts. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab snapshot (click to enlarge) illustrates a few things:
(1) The Open Interest (OI) is by far the largest on the Jun 30 calls and Jun 35 puts. I don't see anything larger than 432 other than those two.
(2) The trades today are focused entirely on the calls thus far.

Yesterday the puts were sold @ $1.70 and the calls purchased for $1.50 - i.e. the trade was a credit naked short the downside and long the upside (this trade is called a "risk reversal" or just a "risky.") Today the calls are trading for 1.35 with the stock down.

The Skew Tab snap (click to enlarge) shows the front month (red) with a typically normal skew. The back months though have a remarkably flat shape. My guess is that this is a reaction to the order flow. You can read about "normal" option skew and why it exists by clicking HERE.

Skew Legend:
Red - Front month
Yellow - Second month
Green - Third month
Blue - Fourth month

The Charts Tab for the underlying (one year) is included for completeness (click to enlarge).

This is trade analysis, not a recommendation.

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