Tuesday, September 28, 2010

Zimmer (ZMH) - Curious Large OTM Call Buyers in March

ZMH is trading $50.45, up 0.7% with IV30™ down 1.0%. The LIVEVOL™ Pro Summary is below.

The company has traded over 45,000 options in the first two hours on total daily average option volume of just 875. All but 646 contracts have been calls yielding a 69:1 call:put ratio. The largest trade was a purchase of Mar'11 65 calls 24,000x for $0.40. 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 March are opening (compare OI to trade size). The calls in Jan'11 (55 strike) are sales on long OI - they are closing that line.

We can see the largest OI in March'11 is 607, so the 35,000 65 calls are huge for this name. Those calls alone make up three months worth of call trading on average.

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

I've highlighted the Mar'11 65 calls. Really not a lot going on in terms of skew shifts, which I do find odd.

Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the vol (IV180™ - orange vs HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

We can see the implied is elevated substantially to the historical (~30 to ~24). The Mar'11 65 calls traded on 28 vol. The 52 wk. range for ZMH is [$46.27, $64.77], so these bets are on a move well past the annual high.

This is trade analysis, not a recommendation.

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