Wednesday, July 13, 2011

EBIX - Puts Trade, Stock Drops, Vol Jumps

EBIX is trading $18.10, down 7.1% with IV30™ up 23.4%. The LIVEVOL® Pro Summary is below.


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Ebix, Inc. (Ebix) is an international supplier of software and e-commerce solutions to the insurance industry. The vol is popping today on the stock drop and the order flow is to the put side. The company has traded nearly 10,000 contracts on total daily average option volume of just 1,631 with puts trading on a 9.6:1 ratio to calls. The Jul 18 and Aug 15 puts are the most active in the front two months. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the Jul 18 puts and Aug 15 are mostly opening (compare OI to trade size). Both lines appear to be substantially purchases, today.

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

It's interesting to see the elevated vol in Jul (three days) to Aug, though earnings are due out in the Aug cycle (projected). Hmmm...

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).

Note the stock collapse on 3-24-2011, when the stock dropped over 24% in a day. Here's a news snippet from that day -- note that the stock dropped mid-day, it didn't gap down on open:

A scathing three-part article that eviscerates Ebix for being overpriced and possibly fraudulent hit the news feed just as the panic-selling started, showing that investors were taking that message to heart.
Source: The Motel Fool: Ebix Shares Plunged: What You Need to Know, written by Anders Bylund.

Today, I can't really find a reason for the drop, but it might be another research note.

Possible Trades to Analyze
1. Calendar spread:
a. The Jul/Aug 17 put spread sells ~100 vol and purchases ~65 vol while picking up the earnings month to sell the last two days of this week.
b. The Jul/Aug 18 put spread sells ~87 vol and purchases ~61 vol with the same position of owning the earnings month against the gamma for two days.

2. Totally the opposite:
Maybe being long the Jul 18 puts for less than $0.50 is worth analyzing given that the stock has moved down nearly $1.40, today alone.

3. Ratios:
With the vol elevated in the Jul 17 puts and the Aug 15 puts, perhaps an Aug 18 put vs one short Jul 17 put and one short Aug 15 put for nearly even is worth some analysis for the risk lover.

This is trade analysis, not a recommendation.

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