Thursday, January 13, 2011

Cypress Semiconductor (CY) - Calls Trade, Stock Pops with Vol

CY is trading $21.66, up 6.5% with IV30™ up 13.3%. The LIVEVOL® Pro Summary is below.


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The company has been going straight up since the open. I've included the Tick Chart below.

The company has traded over 18,000 contracts on total daily average option volume of just 2,742. Calls have traded over 13,000x. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates the action. Combined, the Feb 22 and 23 calls have traded more than 5,000x on essentially zero OI. Both of those lines look like purchases. Oddly, the Mar 18 calls have traded nearly 4,000x and they look like sales.

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

It looks pretty normal. The Feb 21 to 22 skew is bent up slightly, so there's a couple of vol points to examine if you're in the call spreading mood.

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).

So the stock has been on a tear - not just today, but since the earnings release on 10-21-2010. The IV30™ has crossed over the short-term and long-term historical movement of the stock. Something is afoot with the vol up so much today.

Possible Trades to Analyze
There don't seem to be any obvious vol spread plays here, so all the trading opportunities are either straight vol bets or delta bets.

1. Get long deltas
Buy the Feb 21/22 call spread for anything less than $0.50. There is already $0.66 in parity, so that seems ok. Note there are earnings in the Feb cycle.

2. Get short the ATM vol
Sell the Feb 22 straddle @ $2.15
Buy the Feb 21/23 strangle for $1.35
This risks $0.20 to make $0.80 and bets on a small earnings move and big vol crush.

This is trade analysis, not a recommendation.

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