Mid-day Flow Summary: OVTI

Options Trading & Analysis

Posted May 31st, 2007 by Henry Schwartz in Trading & Analysis

OmniVision Technologies Inc (OVTI)

OVTI has been mentioned occasionally as a potential target for acquisition by Kodak. Today the options are trading five times their average daily volume. There was a 70,000 contract calendar spread that traded on the ARCA exchange at 10:02 a.m. In this trade the buyer paid $2.20 for September 15 puts while selling June 15 puts for $.80.

Based on open interest, the June trades are most likely closing. The initiator looks to be rolling an existing hedge out several months for a net debit of $1.40. Of special interest is that the implied volatilities in OVTI are close to 70%, despite recent historical realized volatility in the 35% range. This large divergence of implied vs. realized (emphasized by the large buyer in September) shows expectations for significant movement in the stock over the coming months.

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General Sentiment
Among all listed options today (index, etf, and equity) approximately 1.3 million puts and 2.4 million calls have traded, for an industry put/call ratio of .55. The flow is slightly bearish, characterized by more call sellers and put buyers. The CBOE VIX index is up slightly to 12.86. This suggests some portfolio hedging is taking place as managers look to lock in some of the new highs the market is setting.

About Henry Schwartz

Henry Schwartz has traded derivatives on US and European exchanges for nearly 20 years. His experience includes market-making and institutional trading at the Hull Group, Salomon Brothers, Bear Stearns and most recently Banc of America Securities, where he led the electronic market-making project coincident with the launch of the ISE. His current work involves real-time stream analysis of options market activity for a number of leading institutional sell-side firms.

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