Large prints in MEMC (WFR) are possibly part of a volatility play on earnings. The silicon wafer-maker is due to report tomorrow morning. Around 3:00 EDT, 19700 Aug 2 puts traded on the 22-cent bid and 18,095 Aug 2 calls on the 17-cent bid. It appears to be a strangle write for 39 cents (as if one-to-one). A minute later, 19414 Aug 1.5 puts trade for 6 cents per contract when the market was 3 to 6 cents. But the legs traded electronically on the CBOE so the overall positoin delta of the three legged strategy isn’t known. A strangle write, with a downside put hedge, is one possible play — as vols are up to 124 perent and at the upper end (92nd percentile) of the 52-week range. Shares sank 24.6 percent on 5/10 when earnings were last reported and have seen average daily moves of 12.6 percnet during the past four quarters.
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Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.