Wednesday, April 27, 2011

Lubrizol (LZ) - Calls Trading, Is Something Goin' On?

LZ is trading $134.70, up small with IV30™ down 25.6%. The LIVEVOL® Pro Summary is below.

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This company is in the midst of a takeover from Warren Buffet's company for $135/share. The vol is in the single digits, and the stock hasn't budged for a while. All is well and boring, right?... Well, maybe not?

First, the company has traded over 6,000 contracts on total daily average option volume of just 3,375. More interestingly, calls have traded on a 10:1 ratio to puts. Even more interesting, the most active line is the May 135 calls -- substantially purchases. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls are mostly opening in May (compare OI to trade size). The Jun calls are also active, but have substantially larger OI.

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

As of right now, the skew hasn't really changed shape. The Jun 145 calls look bid, but that's a 10 lot for a nickel.

So, there you have it. Call buyers coming in pretty large (970 lot, 400 lot, etc). in the front month deal price calls and paying $0.30. Stock volume is still about half of the daily average, so this doesn't feel like calls turned into puts (or straddles).

This is trade analysis, not a recommendation.

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