Thursday, May 26, 2011

Tekelec (TKLC) - Order flow Hits Vol... Almost

TKLC is trading $8.82, up 4.6% with IV30™ down 11.1% as of ~ 12:20pm EST. The LIVEVOL® Pro Summary is below.


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I traded this one on (OptionsProfits), so no specific trade analysis in this note. But, this is another interesting vol phenomenon -- seeing some better opportunities of late.

Tekelec is a provider of core network solutions. The Company’s solutions help enable billions of people and devices to talk, text, and access the Web.

I noticed the stock today because of some put side order flow in Aug. The Aug 7, 8, 9 and 10 puts have traded heavily today – all look like sales. Option Monster (David Russell) sent out a note that the 7/8 was a put spread sale and they’re usually good with order flow, so I’ll side with them for now. Either way, it looks like vol sellers and delta buyers. The Livevol® Pro Stats Tab and Day's Largest Trades snaps are included below.

We can see puts have traded on a 97.6:1 ratio to calls, with 11,423 total puts trading on daily average volume of just 180 (406 total contracts for calls and puts). Let’s look to the Charts Tab (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 plummeted down on an earnings release two cycles ago. Since then it has traded in a relatively tight range. The IV30™ is in between the short-term and long-term historical vols. Let's look to the Options Tab, now.

The vol seller today hit ~42 vol in Aug at the open. We can see at the top of the Options Tab that Aug vol is now down 6.4 points to 42.17. Jul vol is also down today, by 5.1 points. Interestingly, the front month vol is unchanged. Let’s turn to the Skew Tab.

What we can see is that the Jun upside to the 9 strike is bid (bent up) and the vol has not decreased today (although Jul and Aug have). The seller hit ~42 vol (green line), and right now the Jun vol is right around that level.

All in all, an interesting result -- that Jun vol is sticky relative to the back and the overwhelming order flow.

This is trade analysis, not a recommendation.

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