Wednesday, November 10, 2010

JPMorgan Alerian MLP (AMJ) - Size Trades; Somebody Knew, But Do They Know Now?

AMJ is trading $36.74, down 0.6% with IV30™ up 39.6%. The LIVEVOL™ Pro Summary is below.


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I wrote abut AMJ just a few weeks ago. Here's the link to that one:
10-26-2010: JPMorgan Alerian MLP (AMJ) - Very Unusual Trading... In Unusual Investment Vehicle...

A quick summary below for 10-26-2010 post:
In this very unusual investment vehicle which is extremely lightly traded, someone bought 6,300 Dec 35 calls and bought 6,300 Dec 36 calls for $0.90 total (this is called a "call stupid" - same side twice). Ok, this is a weird trade. Now, I'm not saying, you know... But, I'm just saying... You know what I'm sayin'?

Just another note here. The company averages 26 calls a day... 26!

AMJ was trading $35.09 at the time, and it's now $36.74. That call stupid closed today. Selling the Dec 35 calls @ $1.55 (bot for $0.60) and the Dec 36 calls @ $0.775 (bot for $0.30). That's a total gain of $733,875. Interesting, but, wait, there's more...

The company has traded over 40,000 options on total daily average option volume of just 360. 10k (ish) were the sales of the long position, but now 28,000 of the Dec 37 calls were purchased for $0.35. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the 35 and 36 calls are closing and the 37 calls are opening (compare OI to trade size). This new trade costs 14,000 * $0.35 * 100 = $490,000, so it's "re-investing" a chunk of the win.

Finally, the Charts Tab (6 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.

We can see the stock has steadily climbed over the last few months. This time the vol is really jumping, up ~ 40%, as opposed to last time where it sort of nudged up just ~ 6%. It looks like smart money was smart this time... But will it be smart again?

This is trade analysis, not a recommendation.

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  1. funny, I bought just one call on Oct following the guy with money and sold it this Monday... hmm... probably will buy another call, volatility disturbs me though, suggesting big move and I'm skeptical that it will be upside...14000 calls however are somewhat convincing... hmm...

  2. it's actually 28,000 now... good for you on the first trade.