Trade bets on lower volatility in Agilent
Chris McKhann | firstname.lastname@example.org
A is down 0.5 percent this morning to trade at $36.87. The bio-analysis systems company is back to levels where it traded just after announcing earnings results in mid-August. Shares have been trending lower from above $46 in late March and reached a 2012 low just below $36 in late July.
Option volume in the name isn't huge today, but it is unusual and interesting. The trade involved 2,000 each of the November 33 puts and 40 calls, with blocks going for $0.85 and $0.81 respectively. The volumes were more than open interest at both strikes.
It appears that both sides of the position traded at the bid prices. The action in the option prices also suggests that they were sold in a short strangle position. (See our Education section)
The trade takes in the credit of $1.66, which will be the profit if shares are between $33 and $40 at expiration. This is also a bet that the actual volatility will be less than that implied by the options.
The implied volatility of the options is 33 percent. Although that is in line with the 30-day historical volatility for A, it is well above the 10-day reading of just 13.7 percent.