Wednesday, February 2, 2011

ON Semiconductor (ONNN) - Calls Trade into Earnings

ONNN is trading $11.59, up 2.0% with IV30™ up 8.9% coming into earnings tomorrow BMO. The LIVEVOL™ Pro Summary is below.


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ON Semiconductor Corporation (ON Semiconductor) is a global supplier of power, analog, digital signal processing, mixed signal, advanced logic, data management semiconductors, memory and standard semiconductor components, and integrated circuits.

The company has traded over 8,700 options in the first two hours on total daily average option volume of just 1,702. All but 87 contracts have been calls, yielding a nearly 100:1 call:put ratio. The action has been long in the Feb 11 and Mar 11 calls.

The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the Mar calls are mostly opening (compare OI to trade size). The Feb 11 calls actually look like closing trades - that is, I believe the existing OI is short and the trades today are long.

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

The front is elevated to the back as expected before earnings. The upside skew in Feb is unaffected by the order flow, but Mar definitely shows a bend up, both on the 11 line and the 13 line. The 12 strike is depressed - and that means a potential trading opportunity to analyze.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV30™ - blue vs HV180™ - pink). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

The stock has been going straight up - good for ONNN! On the bottom portion we can see the IV30™ tends to trade above both the short-term historical (HV20™) and the long-term historical (HV180™). The vol is exploding into earnings - though it seems to be sitting nicely right where it went for the last earnings cycle. How nice and consistent, makes my OCD brain very pleased.

Potential Trades to Analyze
1. Trade March upside skew:
Buy the Mar 12/13 call spread for $0.30 if possible. This purchases ~39 vol and sells ~40 vol. So a vol scalp on a call spread, which is not usually the case.

2. Calendar Spread the downside:
A little trick here, the Feb/Mar 11 put spread costs ~$0.20. If that can get done for $0.15, it's an 11 point vol scalp with some room to the downside. If stock stays here(ish) on earnings, a sale of the Mar 10 puts on Feb expo could yield ~ $0.10, leaving this position with a Mar 10/11 put spread for $0.05. Granted, all of those prices are pretty hard to find.

3. Calendar Spread the upside:
Try the Feb/Mar 13 call spread and pay $0.10. That's a nice cheap bet on some (but not huge) movement upwards for ONNN.

This is trade analysis, not a recommendation.

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