Friday, August 20, 2010

Delta Air Lines (DAL) - Liquidity in Jan '11 with Spiked Vol

DAL closed at $10.78 with IV30™ up to 53.63 (up over 3 points yesterday). The LIVEVOL™ Pro Summary is below.

The company traded over 25,000 options on total daily average option volume of just 6,829. Over 17,000 of those contracts traded in the Jan '11 options. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates the action.

Best I can tell, these were the trades:
Buy Jan '11 12 and 14.5 calls
Buy Jan'11 10 puts
Sell Jan '11 9 puts

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV180™ - orange vs HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

Note how much higher the long term IV is relative to the realized vol (HV). The Jan '11 options have 58 vol while the HV180™ is 51. If you want to sell this vol, selling the 11 straddle and covering up with some wings could be a play; especially if you sell 2 and cover just once on the downside to keep some premium since this is just an $11 stock. Doing this in Dec instead is also a possibility.

This is trade analysis, not a recommendation.

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