Friday, November 12, 2010

STR Holdings (STRI) - Lucky Bet or Cheater?

STRI is trading $20.41, down 16.8% with IV30™ down 24.7%. The LIVEVOL™ Pro Summary is below.


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Jeff Kearns of Bloomberg brought this one to my attention and wrote a great article about it, "Bearish STR Options Surged to Record Before Decline."  Basically there was some large put buying on 11-8-2010, just a few days before the recent stock collapse. Let's look at the details...

First, let's look to 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).

It's the stock collapse of late that's in question - or the order flow surrounding it, really. The company averages 166 puts traded a day with average put OI of just 1,482. The relevant portion of the Stats Tab is included below.

Now we can turn to the trades on 11-8-2010. I've included the Options Montage from that day and the largest option trades below.

So, in total, ~5,000 puts traded in Nov, Dec 25's and Dec 22.5's. That day 5,366 puts traded or ~ 3,800% of the daily average, and whatta' you know?... The stock has gone from ~$28 to $20 or down 28.5%.

I'll repeat what I told Jeff, for what it's worth:
"This is highly coincidental at best, and is foul play at worst. I tend to lean to the latter."

And yes, I did just quote myself, myself... What? It's Friday...

This is trade analysis, not a recommendation.

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  1. Just a thot....suppose you were long 100k STRI and watched it rally 20% in a month. wouldn't you want to purchase some downside pre-earnings?

  2. I don't believe that anyone long that much stock would buy earnings vol to hedge; would be hedged much earlier.. but that's just a guess.