Unusual Options Activity Alert: Sothebys (BID)
Sothebys (BID) $27.05 -1.56%
We are seeing very bullish trading in BID today. There has been nearly triple the normal contract volume trading with buyers actively accumulating May 30 calls for the second straight day. Earnings are expected on Friday.
By early afternoon, more than 6,000 of the May 30 calls have changed hands. 71% of this flow took place on the ask with IV lifting from 88% to over 100% in the contract.
Yesterday nearly 7,000 of these calls traded with buyers paying $.47 to $.80. This activity created 4,600 contracts of new open interest.
Despite the stock trading slightly lower this morning, buyers continue to pay $.80 and are hoping for an earnings-related spike of nearly 10% to break even on these trades.
February earnings boosted the stock nearly $4 from $32 over the two days following earnings. The current May ATM IV of 97% versus June IV of 66% implies an earnings-gap risk of 13.3%, or $2.93
Posted By: Trade Alert
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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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