Monday, January 10, 2011

Hasbro (HAS) - Feb Call Skew Turns on Order Flow

HAS is trading $45.85, down 0.5% with IV30™ ripping up 14.6%. The LIVEVOL® Pro Summary is below.


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This one has some juicy upside skew. The company has traded over 8,500 contracts on total daily average option volume of just 1,116. All but 411 contracts have been calls yielding a nearly 20:1 call:put ratio. The Stats Tab and Day's biggest trades snapshots are included (below). Note the largest trades are all the Feb 52.5 calls on the offer.

The Options Tab (below) illustrates that the OTM calls in Feb are all mostly opening (compare OI to trade size). The 52.5 calls look like purchases, the other two lines are ambiguous as to the side.

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

Check out how far Feb skew is bent up to the OTM calls. Oddly, the Apr calls are flat. Weird...

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).

Look how the IV30™ has exploded passed the long-term historical vol (HV180™)and the short-term historical vol (HV20™). The thing is, I can't find any news. The stock is down a touch but the upside is super bid? Huh?... Keep in mind, the 52 wk range is [$30.20, $50.17]. Why are people buying the Feb 52.5 calls for 37 vol when the Apr 52.5 calls are 28 vol? Or, why at all? And, yes, I know the Feb cycle has earnings.

Possible Trades to Analyze
1. Start Simple, a calendar:
Sell 1 Feb 52.5 call @ $0.35 (~37 vol).
Buy 1 Apr 52.5 call for $0.65 (~29 vol).
Pay $0.30. BUT, this does sell earnings OTM calls.

2. Sell the vol naked (ish)
Buy 1 Feb 50 call for $0.65 (~34 vol).
Sell 2 Feb 52.5 calls @ $0.35 (~37 vol)
Collect $0.10, but naked upside above $55.

3. Anything creative to sell that upside in Feb. Covered is probably the right move.

This is trade analysis, not a recommendation.

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