Options Flow Summary: ATI, AA & VIX
Allegheny Technologies Inc (ATI)
The stock is very volatile today amid takeover chatter. The price has ranged from $105 to $111 and there is twice the normal stock volume. The options on this specialty metals firm are trading well above their usual pace as well. There are 36,000 contracts on the tape today versus an average level of just 8000 contracts.
Upside call buyers dominate the activity, focusing on July 110 and 115 calls. Nearly 7000 of each have traded. Implied volatilities of these options have increased approximately 5 points to the 40% range. This suggests that despite Thyssenkruppís denial of interest, the stock should remain active in the near term.
Alcoa Inc (AA)
The earnings released last night were slightly weak. Not surprisingly, the stock is down .45 percent to 42.17. AA options were very active yesterday as buyers loaded up on July 42.5 calls while selling the 45 strike for close to $1 debit. This is a steep price on a $2.5 call spread.
Today the flow is concentrated in July 42.5 call sellers. They are most likely closing those positions for a loss. By midday more than 20,000 of these calls have traded, most of them for prices near $1.00. Of course, if they remain naked short the 45 calls (and the stock does not move higher) for the next two weeks, these call spread buyers can recoup most of their investment.
CBOE Volatility Index (VIX)
With the broad market down .7%, the VIX index of market volatility is up just over a point to 16.21%. Not surprisingly, VIX options are having an active day. A few large institutional clients are buying ëcollarí positions that would payoff in a significant downside event.
In this trade, a buyer paid $.35 to buy August 17 calls and sell August 15 puts close to 20,000 times. This trade will payoff if implied volatilities stay elevated through August expiry.
"
The stock is very volatile today amid takeover chatter. The price has ranged from $105 to $111 and there is twice the normal stock volume. The options on this specialty metals firm are trading well above their usual pace as well. There are 36,000 contracts on the tape today versus an average level of just 8000 contracts.
Upside call buyers dominate the activity, focusing on July 110 and 115 calls. Nearly 7000 of each have traded. Implied volatilities of these options have increased approximately 5 points to the 40% range. This suggests that despite Thyssenkruppís denial of interest, the stock should remain active in the near term.
Alcoa Inc (AA)
The earnings released last night were slightly weak. Not surprisingly, the stock is down .45 percent to 42.17. AA options were very active yesterday as buyers loaded up on July 42.5 calls while selling the 45 strike for close to $1 debit. This is a steep price on a $2.5 call spread.
Today the flow is concentrated in July 42.5 call sellers. They are most likely closing those positions for a loss. By midday more than 20,000 of these calls have traded, most of them for prices near $1.00. Of course, if they remain naked short the 45 calls (and the stock does not move higher) for the next two weeks, these call spread buyers can recoup most of their investment.
CBOE Volatility Index (VIX)
With the broad market down .7%, the VIX index of market volatility is up just over a point to 16.21%. Not surprisingly, VIX options are having an active day. A few large institutional clients are buying ëcollarí positions that would payoff in a significant downside event.
In this trade, a buyer paid $.35 to buy August 17 calls and sell August 15 puts close to 20,000 times. This trade will payoff if implied volatilities stay elevated through August expiry.
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.
View Henry Schwartz's post archive >
