Thursday, June 24, 2010

BP Plc (BP) - Is Reckoning Day Upon Us?

BP is trading $29.18, down 1.6% with IV30™ up 8.4%. The LIVEVOL™ Pro Summary is below.

Note that the stock is on the verge of touching it's 52 wk low. The stock stats are included (click to enlarge).

The two largest trades yesterday are bets that BP goes through that low and then some. The day's biggest trades snap is included (click to enlarge).

Trade Stats
Sell 10,000 Jan'12 25 calls @ $10.80
Buy 4,000 Jan'12 32.5 calls for $7.45
Buy 3,300 Jan'12 30 calls for $8.55
Buy 6,665 Aug 20 puts for $0.82
Sell 6,665 Aug 10 puts @ $0.12

The first is a call spread sale (which is a put spread purchase) on ratio. The PnL chart is included (click to enlarge).

At expiration, the max gain is below $25 for nearly $5,000,000. If the stock rallies to it's high of the year ($62.38) it loses $9,744,100.

The second is a straight put spread purchase betting the stock goes below $20. Both bets look for the stock well below it's year low.

The Skew Tab snap (click to enlarge) illustrates the vols by month by strike.

It actually has a very pretty skew. What's odd is that the back months (Jan '11 and Jan '12) maintain the shape pretty well. Usually back months show much flatter skews.

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.

A picture's worth 1,000 words. You can see the "line in the sand." Is BP going to fall apart (further)? In the short term, it seems like reckoning day will be soon upon us.

The IV30™ 52 wk. range is [20.05, 117.27]. Note that while the stock is near it's low, the IV30™ is not near its high.

This is trade analysis, not a recommendation.

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