Wednesday, April 27, 2011

VanceInfo Technologies (VIT) - Vol Explodes, Puts Trade, Theme Continues?

VIT is trading $29.61, down 6.0% with IV30™ up 19.9%. The LIVEVOL® Pro Summary is below.


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VanceInfo Technologies Inc. is an information technology (IT) service provider and an offshore software development company in China. I posted a note on this for, so no specific trade analysis.

This stock is trading down with vol exploding. I wrote a first article about a possible Chinese fraud bubble, yesterday. You can read that post here:
GREM USA (GFRE) - Is This The Next Fraud Bubble?

The news pushing down VIT from Briefing is this:
VanceInfo Tech follow-up: Initial indication is that comments on VIT are coming from a sellside desk simply discussing that VIT is a peer to LFT

I'm still stuck on this fraud thing, though. Eddy Altamirano gave me a show on this stock -- brought it to my attention.

Today, VIT has traded nearly 7,000 contracts on total daily average option volume of just 599. Puts have traded on a 23:1 ratio to calls with the action in the May and Jun 25 puts which have traded a combined 4,800x (ish). The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the puts are mostly opening (compare OI to trade size). I'm pretty sure the May puts are purchases, but Jun is a bit ambiguous even though the vol is up substantially in both months.

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

We can see the front month is elevated to the back. Earnings are due out in the May cycle. I do note also that the OTM put side opens up a larger vol difference down the skew. I've highlighted the 25 strike.

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 most notbaly, the vol is exploding. IV30™ was already trading above the historical vols, but now the gap has widened significantly. Hmm...

This is trade analysis, not a recommendation.

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