Thursday, August 26, 2010

Interactive Brokers (IBKR) - Masive Bet for New Lows

IBKR closed at $15.97 yesterday. The LIVEVOL™ Pro Summary is below.

The company traded over 181,000 (not a typo) options on total daily average option volume of just 4,229. All but 757 contracts were puts, yielding a 239:1 put:call ratio. The largest trade was a purchase of 100,000 Jan'11 14 puts for $0.30 with a sale of 50,000 Jan'11 15 puts @ $0.60, tied to a sale of 350,000 shares @ $15.90, on PHLX. This color was provided by Darren Story at Student Options on the floor. 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 Jan'11 14 puts were all opening (compare OI to trade size). Based on today's OI, the Jan'11 15 puts had long interest, so the OI has gone to 77,000+ today.

What's interesting about this trade is that first, it's premium neutral (sell 1 @ $0.60 and buy 2 for $0.30). Second, the options leg of the trade held a short delta already (~10), but added more short delta with stock.

Trade Stats
Sell 50,000 Jan'11 15 puts @ $0.60
Buy 100,000 Jan'11 14 puts for $0.30
Sell 350,000 shares IBKR @ $15.90

The PnL chart is included below (click to enlarge).

The spread loses more than $4.3 million at Jan'11 expo on the long strike. The 52 wk range for IBKR is [$15.32,$20.99]. The PnL at those end points is:
PnL($15.32) = $203,000
PnL($20.99) = -$1,781,500
This trade really looks for IBKR to break through it's annual low, and quite substantially (that is, below $14).

The PnL at various points down are:
PnL($10) = $17,065,000
PnL($11) = $11,715,000
PnL($12) = $6,365,000
PnL($13) = $1,015,000
PnL($14) = -$4,335,000

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV120™ - green vs HV120™ - purple). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

Note how the IV120™ of ~28 (green line) has shot past the HV120™ of 25 (purple line) of late. Interesting bet on the retail arm of Timber Hill.

This is trade analysis, not a recommendation.

Legal Stuff: