For all of you option trader's that followed my suggestion that the INTC straddle was underpriced congratulations. The straddle you purchased for .90 is now worth a minimum of .98, at least for me it is, as that is where I dumped half of my long deltas. For those that want to know how much stock to sell to get flat, do not forget to drop the Jan implied volatility by at least 5 points.
I have to admit; I am surprised I am not buying stock today based on the order flow. Order flow was decidedly bearish all day. This is a run down from LiveVolPro with every trade over 2k contracts that took place today. I placed a red dot next to each play:
As you can see most of the flow was bearish. Paper was in two main trades; it bought 1 Jan 21 put, and sold 2 of the Jan 20 puts. It also bought the 21 calls while selling a large number of Jan 22.5 calls against it. This amounted to a short iron butterfly with 2 to 3 times the short wings. In the end though, the news tonight appears to be good as the stock has rallied about 3% after the market. This is an example of how wrong the street can be when it comes to direction.
However, the street did get one thing right, the volatility. By day's end the street had bid up the Jan 21 straddle to near 1.00 (up about 11% from where we talked about getting in).
After the market, INTC has traded into the high .90s, showing that the IV the street bought was about right and even maybe a bit of a winner. For instance, if the put 1 by 2 trader hedged his delta, he will actually be a winner today. The call 21/22.5 1 by 2.5 will also be a nice winner today. Just goes to show you, that even if the street isn't trying, market forces will get things in line most of the time.
I would note though that there is an entire week to trade left in this stock. Now that I (and hopefully you) have sold your stock above 21.90, I have a good chance to scalp in and out of the gamma in this stock over the next week. My hope is to turn this slight winner into a big winner.
If you wanted to see full scale analysis of how and why I came up with owning the .90 straddle sign up for our Level 1 Large Group Mentoring, something we call The Pit Report. Tomorrow I am going to show how to scalp gamma in a winning position. If you email me info@optionpit.com, I will give you a very special rate for the first month.
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Data from livevol
