Tuesday, May 24, 2011

Hollysys (HOLI) - Vol Explodes, Stock Drops... Why?...

HOLI is trading $8.10, down 7.1% with IV30™ exploding up 56.1%. The LIVEVOL® Pro Summary is below.


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Hollysys Automation Technologies Ltd. (Hollysys), formerly HLS Systems International, Ltd., is a provider of automation and control technologies and applications in the People’s Republic of China.

What's odd here is that I can't really find any news that's driving the stock drop or more notably, the vol rise.

The company has traded 8,066 contracts on total daily average option volume of just 249. The most active line has been the Jun 5 calls which have traded 2,915x and that flow looks like sellers, IMO. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the Jun 5 calls are mostly opening (compare OI to trade size). The Jun 7.5 calls have also traded on low OI -- I think those might actually be sales as well, but I can't tell given the market width at the time of the largest trade ($0.05 x $2.20).

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

We can see that the front month is elevated to the upside and flattish other than that. The back two months show something like a "normal" skew shape. The most noticeable phenomenon here is the vol difference between the months. The monthly vols are 183, 172, and 106 for Jun, Jul and Oct respectively.  This indicates elevated near-term risk relative to the back.

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's decline of late and the atmospheric IV30™ move today.

Possible Trades to Analyze
I've read some news that this is actually sort of common for the stock with respect to the price movement. That is, seemingly unmotivated moves occur, then pass. I dunno, but the stock's recent move down doesn't look "random" to me.

In terms of trades, I do note some interesting phenomena.
1. The Jun 17.5 calls are bid and the Jul 15 calls are not. Huh?... A Jul 15/Jun 17.5 call spread owning Jul and deltas for even or a credit would be what they call a great trade. Hi, I'll take two of those please...

2. Similar spreads all around on both the call and put sides seem practically possible but likely realistically not. But, worth analyzing... When vol moves abruptly often times the spreads get out of whack and scalps or even arbs are possible.

This is trade analysis, not a recommendation.

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1 comment:

  1. Could actually execute the spreads?