Friday, July 16, 2010

McClatchy (MNI) - Enormous One-Sided Vol Order Flow and Vol Explosion

MNI is trading $3.47, down 7.7% with IV30™ up 17.5%. The LIVEVOL™ Pro Summary is below.

MNI is a hybrid print and online, news and advertising company. The Company’s newspapers range from the dailies serving metropolitan areas to non-daily newspapers serving small communities.

The company has traded over 13,000 options on total daily average option volume of just 508. Zero (0) puts have traded; the order flow is entirely call buying in Aug and Jan '11. 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 Aug 4 (5,000 traded) and Jan '11 5 (8,558 traded) are opening (compare OI to trade size). Note also that there isn't a single OI on any line as large as either of these trades. You can see that IV is up 17.3 points in August and 13.2 in Jan '11.

The largest trade was the Aug 4/Jan '11 5 call stupid (bot/bot) against 280,000 stock (sold) @ $3.48. Mike Bristow, master Broker of Vtrader Group, helped me out with the color. This is one sided vol purchase all the way; an expectation that MNI moves below the $2.5 range or above $6 in the next few months. It's almost a bet on a big turn back to the high levels, or a bankruptcy. The vol explosion is a reaction to the order flow.

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

It's pretty odd. Rather than the Aug 4 line bending up (where the order flow was), it's the Aug 5 line that's bid up. Same thing in Jan '11. It's the Jan '11 6 strike that's kinked upwards, not the Jan '11 5 (where the order flow is). You could actually take one side of the delta bet, but spread it off by selling higher vol calls that are more OTM.

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.

Two obvious things I've highlighted on the chart:
1) The stock was as high as $7.16 on 4-21-2010 and then fell apart on earnings.
2) The IV30™ is spiking and is more than 40 points higher than the HV20™.

Through all this, the stock volume is just 1.2 million, below the average of 1.8 million. So there's crazy option volume (~2,700% of normal) and less than average stock volume.

This is trade analysis, not a recommendation.

Legal Stuff:


  1. how did you figure out number of shares sold?
    At delta of options bought about 0.87 I failed to figure out this.
    Also, what do you mean by "You could actually take one side of the delta bet" - example?

    Thanks again for your interesting blog, really useful to learn how pros are doing their business!

  2. I found out how many shares from Mike Bristow. The bet is two sided on deltas (very up or very down). You could take half that bet, i.e. just the upside, by doing the call spreads I mentioned in the blog.

  3. Thanks! Any ideas why calls were time separated?

  4. not really; I did notice that - a bit weird.