Thursday, September 30, 2010

ECA (EnCana) - Vol Explodes, Front Month Calls in Play

ECA is trading $29.78, up 3.2% with IV30™ ripping up over 40%. The LIVEVOL™ Pro Summary is below.

Let's first look to the Tick Chart (click to enlarge). We can see an incredible turn up in the stock and vol (that indicates call buying) as of midday.

I don't really see any news other than some MLP tax treatment stuff, maybe...

The company has traded over 35,000 options on total daily average option volume of just 2,798. All but 2,911 contracts have been calls, yielding an 11:1 call:put ratio. The largest trades are Oct 30, 31 and 32 call purchases where 6,874, 17,177 and 1,209 calls have traded respectively. 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 mostly opening (compare OI to trade size). You can also see that Oct vol is up more than 19 points to nearly 47.

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

October is awesome. It's an entirely backwards skew, where the upside is bid and the the curve has a positive linear slope throughout. To read why skew exists and what "normal" skew looks like, you can read this: Option Skew: A Case Study.

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 vs HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

The stock has been relatively calm until just the last few days. We can also see the wild upturn in the IV30™ at the bottom shooting well past historical vol both short term and long term. Finally, check out the order flow at the very bottom - the green volume bar indicates opening order customer call buying.

This is trade analysis, not a recommendation.

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