Thursday, September 13, 2012

Williams Companies (WMB) - New Multi-year High Met With Huge Call Order Flow

WMB is trading $34.69, up 2.1% with IV30™ down 4.7%. The LIVEVOL® Pro Summary is below.


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The Williams Companies, Inc. (Williams) is an energy infrastructure company focused on connecting North America’s hydrocarbon resource plays to markets for natural gas, natural gas liquids (NGLs), and olefins.

This is a stock and order flow note on a name that has been ripping of late, has breached a new annual high and has seen extraordinary order flow today.

The company has traded over 178,000 contracts on total daily average option volume of just 30,667. Calls have traded on a 124:1 ratio to puts, with the greatest action in a 73.5k x 73.5k Oct 36/38 call spread purchase for $0.46 (I'm guessing it's a purchase based on the prices, but I'm not certain). The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that both of the Oct calls are mostly opening (compare OI to trade size). I also note the activity in the Sep 33 calls -- those are purchases today (IMHO) and are on existing long OI (also IMHO). In the words of one of the guys I sat next to on the floor, "call buyer!" I also note that the stock volume is actually below the average -- so these seem to be unhedged trades.

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

The yellow curve represents the Sep options and green represents the Oct options. I do note a parabolic skew in the Sep options, with both the OTM puts and calls priced to higher vol than the ATM options. However, when I look back at the historical skew over the last week (ish), that parabolic shape is consistent, so I do not note any change in skew based on the flow today.

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 it's hard to miss the impressive run up in price from around late June to today. On 6-25-2012 the stock closed at $27.36 (a six month closing low). As of this writing the stock is up 27% from that level (and this is 23.5% vol stock). The 52 wk range in stock price is [$17.24, $33.99], so obviously the price today is a new annual high. In fact, looking back, this is at least a two year high. The order flow however is betting that this one goes higher... soon....

On the vol side I do note a sort of lazy implied that's been dipping since late June. The 52 wk range in IV30™ is [19.51%, 73.10%], putting the current level in just the 7th percentile.

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