Friday, July 29, 2011

Manitowoc (MTW) - Call Accumulator After Earnings

MTW is trading $13.68, up 1.3% with IV30™ up 7.5%. The LIVEVOL® Pro Summary is below.


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The Manitowoc Company, Inc. (MTW) is a multi-industry, capital goods manufacturer. It operates in two markets: Cranes and Related Products (Crane) and Foodservice Equipment (Foodservice).

The company released earnings on 7-26-2011 AMC (closing at $15.42) and the stock dropped just under a dollar the next day. Since then, the stock has fallen to the mid $13 level. But, there has been some notable order flow in the last two days.

The company has traded just under 9,000 contracts in the first hour on total daily average option volume of just 2,020. Calls have traded on an 11.3:1 ratio with the action in the Sep 15 calls. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the Sep 15 calls have a large existing OI of over 11,000. That OI was 169 yesterday, so ~11,000 contracts opened yesterday, and I believe those are long. The trades today also look like purchases -- I expect that OI to increase again on Monday and that might mean a substantial call accumulator is on the loose.

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

We can see some kinks in the skew -- I've highlighted the 15 strike in both Aug and Sep. That buying pressure has affected the vol, slightly.

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 drop off of earnings and then the trail off after. On the vol side, we can see the IV30™ is actually higher now than it was into earnings. Option buyers are out there and the vol is reacting.

Possible Trades to Analyze
1. Aug call skew trade:
The Aug 14/15 call spread sells slightly higher vol than it purchases which is a nice trick in a call spread.

2. Follow order flow:
Accumulating long deltas in some way would be following the order flow. I would note that the bet is in Sep. not Aug.

3. Total opposite:
If there's a buyer out there in Sep calls, perhaps a good sale can be made and covered with stock or some other options.

This is trade analysis, not a recommendation.

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