Friday, April 16, 2010

Inspire Pharma (ISPH) - Order Flow: A Tip or Not a Tip?

ISPH is trading 6.67 up 11.9%. The LIVEVOL™ Pro Summary is below.

The company has traded ~ 3,300 options in the first hour on total daily average option volume of just 488. All but 67 contracts have been calls. The largest trades have been the Apr 5, May 5 and Apr 2.5 calls in that order for a call:put ratio of 49:1. 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 Apr 2.5 and May 5 calls are all opening (zero OI). The Apr 5 calls are right around OI so at first glance it just feels like closing on expo, but...

Looking at the Level 2 pop-out for the Apr 5 calls we can see the OI jump on 3-11-2010 (click to enlarge).

Then going to the Time & Sales Tab (click to enlarge) on the day before (3-10-2010) and looking at the largest trades in those calls we see that they were in fact purchases. Looks like they traded on the splits $2.125 on a market of 1.85 x 2.15.

This implies that the open interest is in fact long, and therefore the purchases today are NOT closing, they are opening. Why is this weird?...

Because they're $1.50 in the money on expo - they are just stock. The Apr 2.5 calls are also just pure stock and 300 were opened (bought) too. The May 5 calls are also opening. Looking at the stock stats (click to enlarge), the company has traded 2x regular volume already (an hour + into trading). It makes no sense that someone would turn these April calls into puts since the puts are worthless...

It turns out there were two large prints right at the open and I believe may have pushed the stock up so fast on the open. The Tick Chart is included (click to enlarge).

I'll keep an eye on this one - especially near the close. If a huge option order comes in right on the close to get long - it's likely indicating a news "worthy" weekend in this small pharma. Of course, nothing could happen for the rest of the day too...

Finally, the Charts Tab (6 months) 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.

You can see this stock gaps a lot... In fact it's more the norm to have a big move in one direction and then a substantive re-tracement... In other words, this run up could be followed by... a run down... rather than any big news.

This is trade analysis, not a recommendation.

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