Tuesday, March 23, 2010

Titanium Metals (TIE) - Spike at Open on Takeover Rumors

TIE is trading 16.06 up nearly 8% with IV30™ up 8.3%. The LIVEVOL™ Pro Summary is below.

The stock shot up at the open as did vol. The Tick Chart is included (click to enlarge). The top is the underlying, the bottom the front month vol (April).

The recent news from marketwatch.com:
Click Here to read story.

The rally gathered momentum on Monday (read 3/1/2010), even though the Dallas-based company reported a steep decline in fourth-quarter profit.

Investors looked past the 86% drop in earnings to focus on what Titanium expects to be a period of recovery and heightened demand from the aerospace industry.

Specifically, CEO Bobby O'Brien said the upcoming deliveries of the Boeing 787 will raise production rates up and down the commercial aerospace supply chain and boost the company's sales and operating results for years to come.

Today's trading smells of takeover rumors. The company has traded ~ 25,000 options in the first hour on total daily average option volume of just 4,367. All but 1,355 contracts have been calls for a 17:1 call:put ratio. The largest trade has been the Apr 16 calls 19,000+ times (not a typo). The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates that the calls are opening (compare OI to trade size). You can also see that Apr vol is up ~5 points and is now above May which has earnings (a vol event)... hmm...

The Skew Tab snapshot is included (click to enlarge). As is expected, the upside calls are trading with higher vol than the rest of the chain (see April upside - red line). It's interesting that the back months have yet to react (including the vol event month - May - i.e. yellow). They may if the order flow continues. To read what "normal" option skew is and why it exists you can click HERE.

Finally, the Charts Tab (1 year) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

Note that the stock is up over 100% in the last year. Also note the IV30™ rising past the HV20™. The implication is greater near term underlying move than the stock has shown in the recent past.

This is trade analysis, not a recommendation.

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