Friday, June 25, 2010

*UPDATE BP PLC (BP) - Premium Buyers Push Exploding Vol on New Stock Lows


BP is trading $27.07, down 5.8% with IV30™ up 14.0%. The LIVEVOL™ Pro Summary is below.

This is an update from the blog yesterday:BP Plc (BP) - Is Reckoning Day Upon Us?.

I noted yesterday that BP had hit it's 52 wk low of $29 and was hovering just above it. I felt like yesterday was "line in the sand" day, and if it broke the low, it could mean some downward momentum in the stock. Today it seems that in fact BP has broken out lower.

I wrote:
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.

A few note worthy things today:
1) Vol is in fact exploding.
2) The stock has gone through the low.
3) People are buying millions of dollars of premium, but...

The surprise is this. See the Stats Tab and day's largest trades snaps (click to enlarge).

While Net Premium is up, you can see it's mostly in the calls. The 5 largest trades so far today are:

Call Purchase
Put Sale
Call Sale
Call Purchase
Put Sale

Yesterday the massive trades were bearish. Interesting how the order flow has turned bullish in options today, as the stock goes down and vol jumps. I would NOT take today's action as a big signal. It has to repeat to change teh overall sentiment (in my opinion).

Finally I have included a full vol chart for the last 6 months (click to enlarge). red is IV30™, blue is HV20™. The yellow shaded area is the vol dif (IV - HV).

Notice that the implied vol is still considerably below the actual movement of the underlying. Hmm...

This is trade analysis, not a recommendation.

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