Wednesday, September 16, 2009

On 8/27/09, Oskosh (OSK) won the bid for a multi-billion dollar US Army defense contract. As seen on the daily chart below, this caused OSK to surge from $28.62 to close the day at $34.20. On 9/8/09, however, OSK received a stop-work order from the Army after two losing bidders filed protests to the contract. When this news hit the wires around 12:40 CST (bottom right below-click to enlarge), Trading RM traders took advantage of the negative price action.

As seen on the 1-minute chart, there was heavy selling around 12:42 and our traders bought puts within the next minute. The Trading RM Real Time chat (top right below) shows the traders’ entry. Although the protests to the contract would probably not cause a gap fill down to the $28.60 level, the uncertainty of the situation raised implied volatility and the value of the puts. With steady volume, the 1-minute candles closed on their lows as OSK stock dropped $0.80 in just a few minutes. Our opportunistic traders took profits into the move and scaled out of their positions around 12:46. As volume dwindled and the stock found some support, the traders locked up their profits around 12:50. Solid trade!


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