Monday, February 6, 2012

Pitney Bowes (PBI) - OTM Calls Trade Size Ahead of Earnings As Stock Sits Still

PBI is trading $19.29, down small with IV30™ up 2.4%. The LIVEVOL® Pro Summary is below.


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Pitney Bowes Inc. is a provider of mail processing equipment and integrated mail solutions. The Company offers a range of equipment, supplies, software, services and end-to-end solutions, which enable its customers to manage and integrate physical and digital communication channels

This is an order flow note, just a few days ahead of earnings. The company has traded over 21,000 contracts on total daily average option volume of just 3,095. Calls have traded on a 6.4:1 ratio to puts with the action in the Feb 20, 21 and 22 calls. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates the action. The Feb 21 and 22 calls are substantially opening (if not entirely). Although the order flow is a touch ambiguous, in general the flow feels like OTM call buying. The front two months don't show an existing OI in calls over 3,000, so the action today is quite substantial. I also note that the stock volume is less than half the total daily average -- or in English is right at the average for this time of day, so these don't seem to be options + stock (at least not mostly).

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

We can see a normal skew shape to the back two months, while the front shows a bit of a parabolic curve. We can also see the elevated Feb vol to the other two months. Both of these phenomena are due to the earnings release coming out in three days.

Finally, the Charts Tab (six months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side, check out the flat line return over the last month(ish). It's rather remarkable how steady the stock has been. That lack of volatility has resulted in an HV20™ of 9.80%. Whoa, that's low. The HV180™ (the long-term historical realized trend) is 30.82%.

This will be an interesting one to watch after earnings.  Is the call buyer right?

This is trade analysis, not a recommendation.

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