Thursday, August 19, 2010

Direxion Small Cap 3x Bullish (TNA) - Big Bet on a Pop in Two Days

TNA (Small Cap 3x Leveraged) closed at $38.53 yesterday. The LIVEVOL™ Pro Summary is below.

The ETF traded over 11,000 options yesterday on total daily average option volume of just 3,552. All but 1,599 contracts were calls. The action was in the August 39 calls where over 7,700 traded; substantially purchases . 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 calls were opening (compare OI to trade size). It being three days from expo, that analysis is particularly important. A large close isn't anything at all; a large open is a straight delta bet. This isn't really about gamma, vega or anything else. The calls were purchased for ~$1.50; they closed worth about $0.80. The open is over $1,000,000 in premium.

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.

I've included the vol chart for completeness, but again, this is just a delta bet at this point. If you're bullish over the next couple of days, you can ride this bet for half off what the initiator paid. I think a purchase of the 39 calls for $0.80 versus a sale of the 40's @ $0.45 for a total debit of $0.35 is an interesting bet (~2:1 maxGain to MaxLoss). Even a 1 x 2 with the 41 calls @ $0.35 could work. That's a $0.10 debit for the 1 x 2. But again, only if you're bullish, this is not a vol bet.

This is trade analysis, not a recommendation.

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