Tuesday, February 5, 2013

AON - Vega Buyer Shows Up Big in July

AON is trading $55.59, up 1.3% with IV30™ down 2.2%. The LIVEVOL® Pro Summary is below.


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Aon plc (Aon) is a global provider of risk management services, insurance and reinsurance brokerage, and human resource consulting and outsourcing, delivering distinctive client value via risk management and workforce productivity solutions.

This is a quick order flow note -- specifically a vega buyer in July. The company has traded 6,337 contracts on total daily average option volume of just 287. The largest trade appears to be a purchase of 3,100 Jul 55 straddles (6,200 contracts) for $5.55. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that both sides of the straddle are opening (compare OI to trade size). When looking down the entire option chain for AON, I don't see any OI larger than 1,549, so both sides of this trade are very large.

Finally, the Charts Tab (one-year) 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 a tepid appreciation from ~$48 to now just over $55.

On the vol side we can see a big messy chart, which in fact paints a clear picture. The implied and historical realized vols do tend to converge after periods of divergence which is exactly what we see right now. The IV30™, HV20™ and HV180™ are all essentially sitting on top of each other. The 52 wk range in IV30™ is [14.60%, 25.81], so this is isn't exactly a big swinging stock. The current IV30™ is in the 23rd percentile, so relatively depressed to the last year. Looking back to that straddle though, it appears someone is betting on a move by summer. An odd bet I must say... But hat doesn't mean it's wrong.

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This is trade analysis, not a recommendation.

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