Thursday, June 17, 2010

Safeway (SWY) - Call Buyer Looks Like Chartist

SWY is trading 21.46, with IV30™ down 1.9%. The LIVEVOL™ Pro Summary is below.

Start with the Charts Tab (1 year) 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 SWY has a tendency to rise off of these levels as IV30™ (red line) dips below the HV20™ (blue line). The chart today looks like the stock is turning upward as the IV30™ is dipping - i.e the beginning of a repeated pattern.

The company has traded over 4,200 options in the first two hours on total daily average option volume of just 1,340. All but 74 contracts have been calls. The largest trades are July and Sep 22.5 calls purchases totalling over 4,000 contracts (i.e. essentially all the volume). 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 in July are mostly opening (compare OI to trade size). I believe that the Sep 22.5 are long OI, but not sure. Also note that earnings are after July expo (projected).

The Skew Tab snap (click to enlarge) illustrates the vols in the trades.

Note how low the July vol is relative to the other months. It seems like the projected earnings are in fact correct. i.e. July vol looks low. These trades seem to bet on a repeated pattern into a slow summer month without earnings. It buys low vol (in July) and gets long (I don't think the calls were tied to stock, but can't tell).

This is trade analysis, not a recommendation.

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