Wednesday, August 15, 2012

Huntsman (HUN) - Vol Explodes, Skew Shifts Dramatically on Call Purchases... But, Why?

HUN is closed at $14.48, up 6.6% with IV30™ up 46.4%. The LIVEVOL® Pro Summary is below.


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Huntsman Corporation is a manufacturer of differentiated organic chemical products and of inorganic chemical products. The Company operates its businesses through Huntsman International LLC (Huntsman International).

This is a quick vol and stock note with some order flow in the calls. Let's start with the order flow. The company traded 40,749 contracts on total daily average option volume of just 4,066. Calls traded on a 10:1 ratio to puts with the bulk of action in the action in the Sep 16 calls. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the Sep calls are mostly opening (compare OI to trade size). Those look like substantially purchases to me. When looking down the entire option chain for HUN, I don't see any OI much larger than half the volume in the Sep 16's, so the activity is very large.

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

This is a great skew chart -- we can see how the upside calls in Sep are priced to higher vol than the ATM options and the OTM puts. The first large kink upwards is right on that Sep 16 call line. In English, the skew shape has changed dramatically based on the order flow today. I've included the Skew Tab from yesterday (below) as a clear demonstration of this shift in skew.

This is my favorite part of option trading -- the price discovery that happens as order flow changes the shape of the skew. Pretty damn cool...

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, we can see how bumpy the ride has been over the lat six months, yet the return has been right around flat line. I've highlighted the pop today. The 52 wk range in stock price is [$7.92, 15.85], so the current level is quickly approaching a new annual high.

On the vol side we can see how depressed the implied was as of yesterday, and the incredible rise today of nearly 50%. The 52 wk range in IV30™ for HUN is [35.17%, 90.56%], putting the current level in the 36th percentile (annual).

The thing about all this order flow, skew shift and vol move "stuff" is.. I can't really find any news. It feels like takeover spec flow, though the vol rise is incredible and certainly unusually large even for a takeover rumor. Having said that, I really don't know what's going on.

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This is trade analysis, not a recommendation.

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  1. Saudi Sabic Is Considering ‘Major Acquisition,’ Article on MEED (Middle East website) and HUN mentioned as takeover target