Thursday, January 6, 2011

Time Warner (TWX) - Earnings Call Buyer for Size

TWX is trading $33.19, up small with IV30™ up 0.8%. The LIVEVOL™ Pro Summary is below.


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The company has traded 47,239 contracts on total daily average option volume of just 5,305. The Feb 34 calls were purchased AutoExec 40,000x. 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). When looking down the entire option chain for TWX, I don't see any OI larger than half that 40,000 lot, so this trade is very large.

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

What's odd is that the skew doesn't really show a change in shape. I would have expected the Feb 34 line to bump up but... not...

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).

We can see the stock has climbed of late. On the vol side (bottom), we can see the IV30™ has found its way in between the HV20™ (short-term realized movement) and HV180™ (long-term realized movement). Note that earnings are projected for the Feb cycle - so this is an earnings delta and vol bet.

In terms of trades, I would have liked to have seen a kink in the Feb skew and then sold it with a different call to cover, but since the vol hasn't moved, I don't see any really interesting skew trades.  I suppose you could bet with the order flow and buy some deltas into earnings.
This is trade analysis, not a recommendation.

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