Harley-Davidson (HOG) - Put Spreader on Call Sale in July

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Harley-Davidson (HOG) - Put Spreader on Call Sale in July

At the time of this post HOG was trading 26.80, up 2.4% with IV30 up 9.7%. A market snapshot is below.



The company traded over 51,000 options in the first hour on total daily average option volume of just 14,645. The largest trade was a July 20/25 put spread purchase funded by a July 30 call sale 2,187x each. The Stats Tab and Day’s biggest trades snapshots are included (click either image to enlarge).
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The Options Tab (click to enlarge) illustrates that the puts and the call are mostly opening (trade size >> OI). You can also see the June 28 calls traded 8,430 times, but from what I can tell, that is closing (purchase today to close short interest before).
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Trade Stats

Buy 2,187 July 25 puts for $1.24
Sell 2,187 July 20 puts @ $0.23
Sell 2,187 July 30 calls @ $0.81
Net debit = 100*2,187*($1.24 - $0.23 -$0.81) = $43,740
Max Gain (at $20) = 100*2,187*$0.81 + 100*2,187*($5.00 - {$1.24 - $0.23}) = $1,049,760

The P/L chart is included (click to enlarge).
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Note the naked upside in return for a cheaper spread (smaller debit).

The Skew Tab snap (click to enlarge) illustrates the volatilities of the strikes in the trade.
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Finally, the Charts Tab (6 months) is below (click to enlarge). The top portion is the stock price, the bottom is the volatility (IV30 - red vs HV20 - blue). The yellow shaded area at the very bottom is the IV30 vs. the HV20 volatility difference.
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You can see HOG traded over $35 recently and hasn’t been below $23. This could be a hedge by a long stock holder. But it is interesting that volatility was jumping yesterday with the VIX down ~10% on the market rally.

This is trade analysis, not a recommendation.




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