Friday, May 6, 2011

Textron (TXT) - OTM Calls Trade, Call OI Grows in Front Month

TXT is trading $25.14, up 1.7% with IV30™ up 2.8%. The LIVEVOL® Pro Summary is below.


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Textron Inc. is a multi-industry company with a global network of aircraft, defense, industrial and finance businesses to provide customers with products and services worldwide.

I noticed some upside order flow today and some growing OI in the OTM calls in May, so let's give it a quick look before the weekend.

The company has traded over 8,600 contracts on total daily average option volume of just 2,257. Calls have traded on a 190:1 ratio to puts with the action in the May 26 calls (over 6,200 have traded, substantially purchases IMO). 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). Note also the OI in the May 27 and 28 calls. As far as I can tell that interest is long.

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

The Skew looks pretty normal actually, which means no obvious skew trades to discuss (boo). I'm probably over analyzing, but it does look like the 26-28 strikes do bend up a bit in May -- or at least flatten out noticeably... no?

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).

The stock has been essentially dead for the last trading month pushing HV20 sort of artificially low. As of now the IV30™ is trading above both the short-term and long-term historical vols. In English, buying options does feel a bit pricey. I believe earnings are due out in mid-July (maybe even after the July cycle).

This is trade analysis, not a recommendation.

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  1. Hey guys, I have been following your blog for a while and always found your ideas to be very interesting, and very educative.
    It's a pity you are not explaining specific plays anymore, but I guess you will have your own reasons for that.
    Anyways, keep up the good work!

  2. Hi Henrik,

    Thanks for the note. I do discuss specific trades to analyze, but only when the trades really interest me with regard to volatility discussions. Recently, there haven't been a ton of those. I did post one on RMBS earlier today with some cool vol to analyze.


  3. Ophir,

    I appreciate you bringing these to my attention. The underlying and the associated volatilities are the starting point for picking out a strategy. Even when you dosuggest a trade, I still go through multiple "What if;s" in my search for a strategy meeting my trading style and risk reward parameters.

  4. Just to be clear: I NEVER make trade suggestions or recommendations. I post trades in order to demonstrate some ways to analyze them using Livevol Pro I don't give advice, I'm not registered to give advice and neither is Livevol, Inc.