Monday, August 23, 2010

Hershey (HSY) - Selling the Elevated Vol

HSY is trading $47.71, up small with IV30™ down 11.1%. The LIVEVOL™ Pro Summary is below.

Mike Bristow of Vtrader Group gave me the color on the large sale which is pushing IV30™ down hard.

The company has traded over 13,000 options on total daily average option volume of just 3,531. Puts have traded almost 3:1 to calls. The largest trade was 7,500 Sep 46 puts sold @ $0.50 (over 8,700 have traded in total) outright (no stock). 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 puts are mostly opening (compare OI to trade size).

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.

Note how high the IV30™ has spiked past the HV20™. This trade sells 23 vol against an HV20™ of 14, HV10™ of 13 and longer term HV180™ of 21. We can also see that before today, IV30™ reached as high as 26.3, it's down a full 3+ points today.

I like selling this vol (note the dividend, fyi). I want to sell it twice and buy a put above it to keep some short deltas... I'm a bear, deal with it :-).

Trade to Analyze
Buy 1 HSY Sep 47 put for $0.79
Sell 2 HSY Sep 46 puts @ $0.46
Collect $0.13; naked short the downside below $45. For margin worries, I could buy the Sep 43 puts for $0.12.

Disclosure: I did the above trade without the 43 puts.

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment