Wednesday, July 14, 2010

Archer-Daniels-Midland (ADM) - Call Buyer in Sep on Elevated Vol

ADM closed at $26.98 yesterday. The LIVEVOL™ Pro Summary is below.

ADM is engaged in procuring, transporting, storing, processing, and merchandising agricultural commodities and products. At 9:45 EST, a 3,010 lot of Sep 27 calls went up. It looks like they were purchases. You can see the tick chart explode upward about $0.40 at that time (click to enlarge).

The company traded over 19,000 options on total daily average option volume of just 6,542. All but 2,605 contracts were calls yielding a 6:1 call:put ratio. The action was in the Sep 27 and Sep 30 calls; purchases from what I can tell. 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 Sep 27 calls are mostly opening (compare OI to trade size). It turns out the Sep 30 calls were opening too; the OI today is 8,904 so the previous open positions were also long. This looks like a call stupid (purchase/purchase)

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

It's interesting that the Sep upside shows very little movement to the order flow. You can see the 30, 31, 32 calls are bid up a little, but nothing crazy. If the upside does bend up more, a Sep 27/30 call spread (buy/sell) might be a nice trade if you're bullish on this stock. You may be able to get the spread off for <= $0.85 with stock at $27. Just to be clear, although that would be a nice skew trade; it's first and foremost a bullish bet, NOT a vol bet.

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.

The stock looks like most others; down hard, recovery, down again, and now a recovery again. Note though how high the IV30™ is relative to the HV20™. The more relevant IV60™ is 30.85 compared to HV60™ of 27.96. In other words, no matter how you slice it, IV is higher than HV.

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment