Tuesday, June 22, 2010

Frontier Communications (FTR) - 17,000:1 put:call ratio

FTR is trading 7.75, IV30™ is up 13.2% on some insane put action yielding a ~17,000:1 put:call ratio today. The LIVEVOL™ Pro Summary is below.

The company has traded over 83,000 options in the first hour on total daily average option volume of just 1,977. All but 5 (five) contracts have been puts. The largest trades have been 20,000 July 7.5/5 and Aug 7.5/5 put spread purchases totalling 80,000 contracts . 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 puts are mostly opening (compare OI to trade size). You can also see that July vol is above Aug even though earnings (projected) are in the Aug cycle (a vol event). The large OI in the Aug 7.5 puts is long (as far as I can tell). So these purchases today will push that OI into the 30,000 range.

The trade volume is enormous for this underlying. Note that other than the Aug 7.5 and July 7.5 puts, there isn't an OI above 1,900. Now there will be four lines at the 20,000+ level. The trade was executed as a spread inside the NBBO, so it feels negotiated and therefore could be delta neutral. The stock averages 4.8 million shares a day and has already done 3.2 million. The trade was done on ISE which is all electronic.

Finally, the Charts Tab (12 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 the IV30™ (red line) jumping past the HV20™ (blue line) today. The 52 wk range is [$6.43, $8.57]. The PnL for the trades together at expo. is included (click to enlarge).

This feels like a hedge but the largest individual holder has just 950,000 shares, and then number two is 350,00. The put spread covers 4 million. There are three large institutional holders (mutual funds) with more than 10 million shares.

I believe there is a news report broken by Bloomberg that FTR is suing Google over some voice technology over the internet.

This is trade analysis, not a recommendation.

Legal Stuff:


  1. this is not what i wanted to see. i put on a position right before ex date just for the divy,then sold half the position. holding the other half.either someone is purposely pushing the stock down for some big action for the near future,like the first of july that ftr completes the deal with verizons landlines.or, a take over target for principals to get in cheap.either way something is fishy.great work,thanks chris

  2. very clear what is going on here.. someone is placing a big bet that the stock is going to move post verizon spin off. Just look back at what happened to fairpoint communications after the last verizon asset spin off. If nothin else a huuuge amt of ftr shares need to get sold pos spin off. Something on the order of 600mm +
    point being.. the shares could be in for punishment jus on the basis of forced selling from managers who do not want to hold ftr.