Tuesday, April 19, 2011

BMC Software (BMC) - Calls Trade, OI Loaded Ahead of Earnings

BMC is trading $48.86, down 0.7% with IV30™ up 4.1%. The LIVEVOL® Pro Summary is below.


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BMC Software, Inc. is a software vendor. The Company provides systems management, service management and automation solutions primarily for large enterprises. Its portfolio of software solutions include mainframe, distributed and virtualized systems, applications, databases and information technology (IT) process management functions.

I'll post a vol story for the second article today, but for now, let's look at BMC and some earnings order flow. The company has traded just over 7,000 contracts on total daily average option volume of just 1,475. All but one contract are calls, yielding a 7044:1 call:put ratio. The action is in the front month where earnings are due out in a few weeks. The May 52.5 calls have traded over 5,100x (substantially purchases in my opinion) and the May 50 calls have traded 1,875x (also substantially purchases IMO). The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the May 52.5 calls are mostly opening (compare OI to trade size). The May 50 calls actually look like short OI against what I believe are purchases today. The only other OI that's near 5,000 is the May 55 calls -- those also seem long. Hmm...

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

The skew looks normal, though the upside is flat in May and Jun (i.e. vol is higher than "normal.")

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).

The stock has been relatively... uninteresting. The vol is elevated coming into earnings. The stock volume is on track for a normal day, so I don't see the calls getting turned into puts. The OI in the May 55 calls (and now the 52.5 calls) does have my attention. Yet another one to keep your eyes on. The skew does tend to bend on BMC when call volume picks up -- so watch for some interesting skew trades to the upside.

This is trade analysis, not a recommendation.

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