Monday, February 22, 2010

Commercial Metals (CMC) - Takeover Rumors, Skew Bend

CMC is trading 16.81, up 11.4% today with vol up nearly 33% (15 points). The LIVEVOL™ Pro Summary is below.

I found CMC on the high option volume scan (option volume relative to each company's average). Click the image to enlarge it. You can see CMC has traded 1500%+ its daily average in just 2 hours.

The company has traded over 21,000 options today in the first two hours on total daily average option volume of just 1,378. Further, 19,600+ calls have traded for an 11:1 call:put ratio. The largest trades have been the Mar 17.5 calls (nearly 10,000). The Mar 15 calls (3,013) and Apr 17.5 calls (1,639) are also active. The Stats (Company) Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab snapshot (click to enlarge) is included. Note the trading volume is larger than OI (open interest) - these are substantially opening trades.

The news seems to be a takeover rumor. With the rumor comes a bend in the skew. You can see the CMC skew today and the SCHN skew (a "peer" with similar market cap). Click either image to enlarge.

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

Note the distinct upside bend to the CMC skew in the front month (red) as these options are bid up on the rumor. The second month (yellow) is also relatively flat to a standard skew. SCHN follows a more standard skew. For a full run down on why option skew exists you can read the blog HERE.

This is trade analysis, not a recommendation.

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