Friday, November 5, 2010

Allscripts Healthcare (MDRX) - Bullish Earnings Bets Roll In

MDRX is trading $19.40, up 1.1% with IV30™ up 13.5% and earnings due out Monday (11-8-2010) AMC. The LIVEVOL™ Pro Summary is below.


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The company has traded over 26,000 options on total daily average option volume of just 934. Calls have traded on a 49:1 ratio to puts. The action is in the Nov 19 and 20 calls where over 20,000 contracts have traded. The largest trade was 7,172 Nov 20/21 call spreads bought for $0.30. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size). I don't see a single line with greater than 2,000 OI, so this call spread into earnings is pretty large. Also, it looks like there is another 6,000 (ish) calls that traded in the Nov 20 line outside of this spread.

The Skew Tab snap (below) illustrates the vols by strike by month.

As expected, the upside is bid in both Nov and Dec. The flat line vol for the upside in Nov after the spike is a rather unusual sight, though it makes sense given that the largest trade was in fact a delta leaning spread.

Finally, the Charts Tab (2 months) is below. 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.

Note the bottom portion of the chart. IV30™ has spiked well over HV20™ (short-term realized stock movement) and HV180™ (long-term realized stock movement).

Over the last few earnings cycles, MDRX has been relatively tame. One caveat, after the 4-7-2010 cycle, the stock didn't move a lot off the initial news, but did catapult about $2 higher over the next few days.

Possible Trades to Analyze
1. If you're bullish, the Nov 19/20 or 20/21 call spread is out there. Note that the 19/20 allows a skew scalp (sell high vol/buy low vol) while 20/21 does not.

2. A little more daring, sell the Nov 19 straddle @ $1.30 (ish) and buy one or even two Nov 20 calls. Maybe purchase the Nov 17 puts for $0.10 to trim margin costs.

3. Be contrarian. Try to be on the other side of that Nov 20/21 call spread but set prices on the NBBO and see if someone comes in for size again.

This is trade analysis, not a recommendation.

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