Monday, April 18, 2011

Sony (SNE) - Calls Trade Ahead of Earnings on Elevated Vol

SNE is trading $29.25, down 1.5% with IV30™ up 8.3%. The LIVEVOL® Pro Summary is below.


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Sony Corporation (Sony) is engaged in the development, design, manufacture, and sale of various kinds of electronic equipment, instruments, and devices for consumer, professional and industrial markets, as well as game consoles and software.

Earnings are due out around the middle of May -- so, likely the May options cycle. The order flow caught my attention as did the vol.

The company has traded over 6,924 contracts on total daily average option volume of just 1,631. Calls have traded on a 4.5:1 ratio to puts. The action has been in the May 30 calls, where 4,614 contracts have changed hands. I believe the order flow to be mostly purchases. 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 SNE, I don't see any OI larger than 2,200 and that's in Jan '12, so the volume in the May calls is quite high for this stock.

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

The upside skew sort of bends up in May on the 33 strike -- but in general the shape is pretty normal in both the front two months. I would have expected a bit more reaction in vol -- but alas, there isn't as of yet.

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 collpased on the Japanese disaster and is actually plunging to new recent lows today. The IV30™ is substantially elevated to the short-term and long-term realized vols.

The stock volume is about half the daily average so it doesn't feel like the calls are geting turned into synthetic puts -- this does feel like a bullish play on dipping stock headed into earnings this cycle (or probably this cycle).

Possible Trades to Analyze
There isn't a whole lot going on in terms of skew bumps, etc. One trade that just feels sort of interesting is the May 31/33 call spread for $0.35 or the 32/33 call spread for $0.15. Both trades sell either equal (ish) or higher vol than they purchase in a call spread. Having said that, it isn't spectacularly interesting to me.

I'd keep an eye on this one - my guess is another day of similar order flow, and the skew will bend to open some nice spreads to examine.

This is trade analysis, not a recommendation.

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