Friday, August 6, 2010

China Yuchai (CYD) - Sep Mulit-legger; Bets on a Drop

CYD is trading $18.74. The LIVEVOL™ Pro Summary is below.

The company has traded over 19,000 options in the first hour on total daily average option volume of just 657. The largest trade accounted for essentially all the volume; buy the Sep 17.5/15 put spread and fund that with a Sep 20 call sale. Mike Bristow of Vtrader Group gave me color. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates that all three strikes were opening (trade volume >> OI).

Trade Stats
Buy 6,350 Sep 17.5 puts for $0.85
Sell 6,350 Sep 15 puts @ $0.15
Sell 6,350 Sep 20 calls @ $0.60
This gives us a put spread for $0.70 and selling calls to fund it yielding a total of $0.10 debit.

The PnL chart is included (click to enlarge).

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

The trades are up and down the skew; selling the highest and lowest, buying the middle. The bet is pretty simple; CYD goes down below $17.40 by Sep expo, or vol jumps on the bottom side of the skew (market decline).

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.

Notice how high the IV30™ is relative to the HV20™ (50 vs 33). I like that this bet sells two options for the one purchased. The 52 wk range is [$8.16,$21.68]. This trade starts to lose size above $20.

This is trade analysis, not a recommendation.

Legal Stuff:

1 comment:

  1. Interesting, given how successful the stock has been since 2009.