Tuesday, September 28, 2010

Foster Wheeler (FWLT) - Oct Call Buyers on Promising News; Buyout Rumors Surface

FWLT is trading $24.67, up 3.8%. The LIVEVOL™ Pro Summary is below.

The news from Yahoo! Finance:
8:15AM Foster Wheeler obtains encouraging results from initial PetroAlgae biomass testing (FWLT) 23.76 : Co announced that its Global Engineering and Construction Group, working with PetroAlgae (PALG.OB) has completed its initial testing of PetroAlgae's biomass, with encouraging results. The biomass, produced at PetroAlgae's micro-crop farm in the U.S., is being tested as a delayed coker feedstock supplement to provide renewable biofuels to the market.

Buyout rumors are surfacing... Here's a quick look at the Tick Chart today (click to enlarge).

The company has traded over 15,000 options on total daily average option volume of just 2,987. All but 915 contracts have been calls yielding a 15:1 call:put ratio. The action is in the Oct 25 and 26 calls where over 10,500 have traded. I believe the interest to be substantially buyer initiated. 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 in both lines are mostly opening (trade volume >> OI).

We can also see that Oct vol is up while all other months are down. This leads me to believe there is substantial buying interest.

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

I've highlighted the calls in play. Interesting to note that the skew hasn't budged - flat and consistent throughout.

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.

We can see that the IV30™ is caught in between the short term historical (HV20™) and long term historical (HV180™). We can also see the FWLT has been much higher, up to over $32 in late April. The 52 wk. range is [$23.33, $35.01].

This is trade analysis, not a recommendation.

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