EXCO Resources (XCO) - Elevated Implied, Elevated Historical, More Insider Buying Than... Everyone

XCO is trading $10.56, up 4.1% with IV30™ up 11.5%. The LIVEVOL® Pro Summary is included below.



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EXCO Resources, Inc.(EXCO) is an independent oil and natural gas company engaged in the exploration, exploitation, development and production of onshore North American oil and natural gas properties.

The final note of 2011 is fittingly, a note on elevated vol. I found XCO using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20 LTE 10
HV180 - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated IV30™ simply because earnings are approaching.

The XCO Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



On the stock side, we can see the a drop from over $17 six months ago, to now in the $10 range. Check out the vol portion, though. That pink line is the long-term historical realized vol. It got to the ~22% level in late Jul . The HV180 is now 56.41%. Even with that HV180 trend, the implied is now trading substantially above  both historical realized measures. Specifically:

IV30™: 72.16%
HV20: 56.72%
HV180: 56.41%

As recent as 12-23-2011 (seven calendar days ago), the implied was trading 55.85% -- a level that was below both historical realized measures.

I found some news via Yahoo! Finance from TheStreet.com referencing some data from www.InsiderInsights.com. It lists the top ten open-market purchases by insiders. XCO is number one in shares and dollar value... And in dollar value of shares purchases the XCO insider action is ~250% of the second highest company listed (GEOY). The source for the article is here: Insiders Trading XCO, VTR, GEOY, REN, written by Jonathan Moreland.

Hmmm...

Let's turn to the Skew Tab, below.



There is an awesome upside skew to XCO in Jan. Essentially a straight line up. That Jan OTM call vol quite elevated to the Feb and Mar OTM calls. In terms of order flow, calls have traded on an 8.2:1 ratio to put with nearly 5,000 calls trading on daily average volume of 1,612 calls traded.

Finally, let's look to the Options Tab (below) to see the specific vol levels.



The Jan 13 calls are priced to 84 vol while Feb and Mar are priced at 74 vol. Moving to the 14 level calls, we can see an 18 and 14 vol point difference respective to Feb and Mar.

This is trade analysis, not a recommendation.

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Leap Wireless (LEAP) - JPM Note and AT&T / T-Mobile Fallout Re-spark Takeover Rumors

LEAP is trading $9.19, up 8.2% with IV30™ up 9.3%. The LIVEVOL® Pro Summary is below.



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Leap Wireless International, Inc. (Leap) is a wireless communications carrier that offers digital wireless services in the United States under the Cricket brand. Leap’s Cricket service offerings provide customers with unlimited wireless services for a flat rate without requiring a fixed-term contract or a credit check.

This is an order flow note -- likely the last of 2011. LEAP is moving on a story today that JPM believes LEAP (and / or Metro PCS) may be the next potential takeover candidates for T after the T-Mobile deal failings. Here's a news snippet from Bloomberg:

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Leap Wireless International Inc. (LEAP) and MetroPCS Communications Inc. (PCS) may be takeover targets for bigger rivals AT&T Inc. (T) or T-Mobile USA after the larger companies’ $39 billion merger plan collapsed, JPMorgan Chase & Co. said.

The pay-as-you-go carriers could be suitable “near-term” sources of spectrum for a buyer, Phil Cusick, a JPMorgan analyst in New York, said in a note to clients today. AT&T cited a need for more spectrum as a reason for its attempt to buy T-Mobile.

Source: Bloomberg via Yahoo! Finance: Leap, MetroPCS May Be Buyout Targets for AT&T, JPMorgan Says, written by Ville Heiskanen.
---

I used to make a market in LEAP on NYSE ARCA back in early 2008. I believe it was a ~$50 stock back then. It's... not anymore...

The company has traded 10,835 contracts on total daily average option volume of just 1,655. Calls have traded on a 25.8:1 ratio to puts with the action in the Jan 9 calls. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls are likely mostly opening (compare OI to trade size). In fact, that OI jumped from 1,950 on 12-20-2011 to 3,640 on 12-21-2011 on what look like purchases. Today's action looks like purchases too, so I'm expecting that OI to pop to over 10,000 next Tuesday, when trading resumes.



The Skew Tab snap (below) illustrates the vols by strike by month.



The skew is actually kinda normal. There is an upside tilt to the OTM calls in Jan and somewhat in Feb -- that's a reflection of the order flow. But, I've seen LEAP skew more upside heavy as recent as Dec. 1. I actually wrote about that. You can read that post here -- Leap Wireless (LEAP) - Parabolic Risk, Calendar Vol Diff -- and see the skew chart from that date below.



Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



We can see a few things here:

1. The stock has dropped over the last six months -- it was over $16 in Jul.
2. Over the last several months (circles), the stock has been sorta stuck in a rut. Of late even more so -- the HV20 has been dipping (see the blue line going down in the vol chart).
3. The implied has dipped recently as well, except for the last few trading days. In fact, as I'm writing this note, the IV30™ has risen to over 88.5%. Still, the 52 wk range in IV30™ for LEAP is [39.57%,119.04%], so the vol can go higher... If the rumor mill really heats up in early Jan, that vol could top 100% again.

This is trade analysis, not a recommendation.

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Chelsea Therapeutics (CHTP) - Eerie Calm; March Options Reflect Elevated Risk

CHTP is trading $5.14, down small with IV30™ down 5.7%. The LIVEVOL® Pro Summary is below.



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Chelsea Therapeutics International, Ltd. is a development stage pharmaceutical company that focuses on acquiring, developing and commercializing products for the treatment of a variety of human diseases.

This is an order flow note -- in particular in the elevated downside Mar vol. The company has traded over 2,600 contracts on total daily average option volume of just 651. Puts have traded on a 19:1 ratio to calls with the action in the Mar 3 puts (~1,450 have traded today). The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the puts have traded on an existing OI that's about the same size. Looking at the historical OI chart in Livevol® Pro, we can see the OI jumped today from 289 to 1,289. Easy math tells us that 1,000 opening contracts traded yesterday. Those look like purchases, and the puts today look like purchases again. This feels like a double down in opening downside puts.



The Skew Tab snap (below) illustrates the vols by strike by month.



We can see a decided vol diff between the months -- specifically, Mar is elevated to the front two months. The option market reflects an event / news in the Mar cycle, but not in the Jan or Feb cycles. Cool... Looking to the Options Tab (above), we can see that Jan, Feb and Mar are priced to 57, 87 and 182 vol, respectively.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



The part of this chart that grabbed my attention was the tail end of the HV20. The stock has essentially stood still in the last month of trading. This is common when a "news" stock has an event due out in the relatively near future and investors / traders are basically waiting for that news. The stock finds an eerie calm until... it doesn't.

This is trade analysis, not a recommendation.

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TiVo (TIVO) - Depressed Back Month Vol to Earnings, Elevated Front on Vol Pop

TIVO is trading $8.79, unched on the day with IV30™ popping up 10.8% a of ~11am EST. The LIVEVOL® Pro Summary is below.



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TiVo Inc. (TiVo) is a developer and provider of software, hardware, and services. As of January 31, 2011, the Company generated revenues from three sources: consumer service, developing technology for television service providers and media services.

TIVO was the innovator of an amazing technology and likely suffered from being too early. Now they seem to always be embroiled in a lawsuit – usually as the prosecution. I’ll skip those details and direct anyone interested in the gory details to do a web search – you’ll find a LOT of stories.

Today, however, I’m interested in TIVO because of a vol phenomenon. Specifically, the month-to-moth vol diffs and an earnings date. Let’s turn to the Skew Tab.



We can see a monotonic vol increase from the back to the front months. Interestingly, TIVO likely reports its next earnings in Mar (which would be the May expo per this chart). Earnings are obviously a volatility event, yet the front months are pricing higher vol than the back. Cool…

Let’s turn to the Charts Tab (6 months) for a better picture of the overall vol level. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



We can see the stock has seen some pretty low lows. On the vol side, we can see that the move today has pushed the implied above the two historical realized measures. Specifically:

IV30™: 72.72
HV20: 40.32
HV180: 60.06

Let’s turn to the Options Tab to examine the monthly vol levels to precision.



At the top, we can see that Jan, Feb and May are priced to 73.41, 71.88 and 62.16 vol, respectively.

I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. I will remind that the next earnings date for TIVO is likely at the end of Feb or early Mar – so not in the front two expirations. With the HV180 at ~60, the May vol which includes the earnings event for ~62 vol is interesting. It is good to note though that often times it's court dates and rulings that are more focused vol events than earnings for TIVO.

This is trade analysis, not a recommendation.

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Hartford Financial (HIG) - Depressed Vol, Earnings Patterns and Vega

HIG is trading $16.19, down 1.0% with IV30™ up 3.3%. The LIVEVOL® Pro Summary is below.



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The Hartford Financial Services Group, Inc. (together with its subsidiaries, The Hartford) is an insurance and financial services company.

I found this stock using a real-time custom scan. This one hunts for low vols. I have combined that low vol analysis with some historical earnings move analysis. Let's start with the custom scan details and the vol comps.

Custom Scan Details
Stock Price GTE $7
IV30™ - HV20™ LTE -8 GTE -40
HV180™ - IV30™ GTE 7
Average Option Volume GTE 1,200
Industry != Bio-tech
Days After Earnings GTE 32

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.



The goal with this scan is to identify short-term implied vol (IV30™) that is depressed both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not purchasing depressed IV30™ relative to HV20 simply because of a large earnings move.

The HIG Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



Like the MS post earlier today, HIG stock is off from it's highs quite substantially. In late Jul this was a ~$27 stock. As of this writing it's down 40% from those levels. On the vol side,this is one of those interesting stocks where the implied tends to trade below the realized vol. In English, owning the vega in this name tends (or has tended) to be a winner with proper gamma scalping. As of right now that depressed implied to historical has found a rather large(ish) difference. Specifically:

IV30™: 44.98
HV20: 60.31
HV180: 61.04

HIG has an earnings report due out in early Feb (ish). The last two years earnings were reported on 2-8-2010 and 2-7-2011 following 11-3-2009 and 11-2-2010 earnings dates. The last earnings report for HIG was 11-2-2011, so it might be a reasonable guess that the next earnings report will be in the Feb cycle but outside (after) Jan.

I've included some stats surrounding the one day before and after earnings reports for HIG, below.



We can see the absolute value in stock change (in % terms) is 4.57%. In English, for the last eight earnings cycles, HIG stock has moved on average 4.57% (in absolute value) the one day following earnings.

Let's turn to the Skew Tab, below.



We can see that the Jan ATM options are priced below Feb (in vol terms). But, that Feb / earnings vol is showing a fairly slight elevation. Let's turn to the Options Tab for some more detail.



We can see Feb vol is priced at ~46% compared to Jan 44%. Looking back to that Charts Tab snapshot (above), we can see that 46% vol is still depressed to the two historical measures. Of course, those historical measures may look different in a month.

Looking more closely at Feb, we can see that the ATM (16 strike) straddle is priced to $2.26 fair value. That represents ~14% of the current stock price. It's interesting to look at that straddle value relative to the prior earnings moves (which are represented above as just a single day).

This is trade analysis, not a recommendation.

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Morgan Stanley (MS) - Depressed Vol into Ambiguous Earnings Date

MS is trading $15.22, down 0.5% with IV30™ up 0.2% as of ~10:20am EST. The LIVEVOL® Pro Summary is included below.



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Morgan Stanley is a global financial services firm that, through its subsidiaries and affiliates, provides its products and services to a group of clients and customers, including corporations, governments, financial institutions and individuals.

This is a vol note surrounding an upcoming earnings report. Specifically, I’m interested in examining some depressed vol for MS. Let’s start with the Charts Tab (one year), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



We can see that MS is actually down ~50% from its annual high in mid Feb. On the vol side, we can see that the implied has spiked and stayed elevated relative to the earlier part of the year since early Aug. Relative to that spike in August, the vol comps today actually point to depressed vol. So, to convolute things, I’m examining depressed-elevated vol. Specifically we can see today:

IV30™: 56.43
HV20: 78.22
HV180: 68.24

That IV30™ level is the lowest it has been since 10-28-2011. The 52 wk range in IV30™ though is [22.87%, 128.59%], which is an incredibly wide range. A linear interpolation puts the current IV30™ level at the 32nd percentile.

For the last two years MS has reported earnings on 1-20-2010 and 1-20-2011 with prior earnings dates of 10-21-2009 and 10-20-2010. Last cycle, MS released earnings on 10-19-2011. All of this date parsing becomes interesting because Jan expiry is 1-20-2012. So, in English, there’s an earnings report (a volatility event) coming either in the last few days of the Jan options cycle or the first few days of the Feb cycle.

Let's turn to the Skew Tab to examine month-to-month vols.



The phenomenon that grabs my attention here is that all three months show nearly identical ATM vol. Usually, a rather noticeable separation exists between the earnings month and the others. The ambiguity as to the earnings date may be the culprit here, but either way, the implied is depressed relative to the two historical measures across all three front expiries.

Let's turn to the Options tab for completeness.



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. But, we can see at the top of the Options Tab that the Jan, Feb and Apr options are priced to 56.03, 57.06 and 58.28 vol, respectively. The depressed implied in MS combined with the earnings report / vol event make a compelling case for vega analysis. Countering the "cheap" vega argument is the IV30™ level of MS last Jan, which was in the low 30's.

This is trade analysis, not a recommendation.

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Akamai Technologies (AKAM) - Depressed Vol After Stock Spike; Acquisition Looks to Make Acquirer an Acquired

AKAM is trading $32.12, up 0.6% with IV30™ up 5.6%. The LIVEVOL® Pro Summary is included below.



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Akamai Technologies, Inc. (Akamai) provides services for accelerating and improving the delivery of content and applications over the Internet; ranging from live and on-demand streaming video capabilities to conventional content on Websites, to tools that help people transact business and reach out to new and existing customers.

I found AKAM using a real-time custom scan. This one hunts for low vols. The elevated HV20 is a bit misleading, more on that in a sec.

Custom Scan Details
Stock Price GTE $7
IV30™ - HV20™ LTE -8 GTE -40
HV180™ - IV30™ GTE 7
Average Option Volume GTE 1,200
Industry != Bio-tech
Days After Earnings GTE 32

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.



The goal with this scan is to identify short-term implied vol (IV30™) that is depressed both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not purchasing depressed IV30™ relative to HV20 simply because of a large earnings move.

The AKAM Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



We can see that the IV30™ is depressed relative to the two historical measures. But, the HV20 is elevated b/c of a large pop on 12-22-2011. Here's the news on that day from The Motley Fool.

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What: Shares of content delivery network specialist Akamai Technologies (Nasdaq: AKAM ) are delivering solid gains today, up by 20%, after the company announced it was acquiring smaller competitor Cotendo.

So what: Akamai is picking up the company for $268 million in cash, taking out one of its direct rivals to its lucrative Value Added Services business. The deal has even brought up speculation that Akamai itself could appear to be an attractive acquisition target now.

Source: Akamai Shares Soared: What You Need to Know, by Even Niu.
---

Tricky... An acquisition that may lead to an acquisition. The stock went from $26.67 on 12-21-2011 to $32.12 as of this writing, or up 20.4% in six calendar days. The current vol comps are:

IV30™: 45.24
HV20: 72.83
HV180: 60.09

Let's turn to the Skew Tab, below.



Check out how depressed the Jan options are to Feb. That's likely due to earnings as the last two years earnings for AKAM were 2-3-2010 and 2-9-2011.

Let's look to the Options Tab (below) for completeness.



Feb vol is priced to ~52 while Jan is priced to ~42. It's interesting how little the implied has been affected by the large move / news. On the day before the announcement IV30™ closed at 42.34% ad today it's just a few points higher. The Jan ATM straddle (32.5 strike) is worth ~$2.80 priced to mid-market. Given that the stock moved $5.45 in six calendar days on event news, it's notable that the future for Jan is priced relatively... quietly...

This is trade analysis, not a recommendation.

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ATP Oil & Gas (ATPG) - Elevated Vol Trend

ATPG is trading $7.39, up 3.1% with IV30™ up 2.5% as of ~11am EST. The LIVEVOL® Pro Summary is below.



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ATP Oil & Gas Corporation (ATP). is engaged in the acquisition, development and production of oil and natural gas properties in the Gulf of Mexico and the United Kingdom and Dutch sectors of the North Sea (the North Sea).

This is a vol note – specifically a company with elevated vol that tends to move in a patterned ebb and flow. Let’s start with the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



I’ve circled/highlighted a lot here. In the stock portion (top) we can see three abrupt stock declines in the last six months. Two of those (the first and third) were directly off of an earnings release. On the vol side, we can see the implied spike into earnings. In the middle stock drop, we can see the implied spiked essentially as high as it did into earnings.

Let’s fast forward to today’s vol levels. We can see that while the implied is elevated to the two historical realized measures, it’s nowhere near those other three elevated levels.

Specifically:
IV30™: 104.61
HV20: 72.98
HV180: 89.42

Let’s turn to the Skew Tab to examine the month-to-month and line-by-line vols.



We can see that the Jan and Feb vols lie almost directly on top of each other so the elevated vol right now doesn’t seem to be focused on an event in one month and not in another. Ultimately the skew is “normal,” with the downside puts bid relative to the OTM calls.

Finally, let’s turn to the Skew Tab for completeness.



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. I will say that the The 52 wk range in stock price for ATPG is [$5.53, $21.40]. While the next earnings release is likely after Feb expo, it’s the fact that the stock dropped and vol spiked a much as it did without an earnings report that caught my attention wrt to risk.

This is trade analysis, not a recommendation.

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Mead Johnson (MJN) - Stock Drops, 80% Spike in Vol Pushes New High on Product Recall from Wal-Mart

MJN is trading $64.00, down 16.3% with IV30™ exploding up 81.8%. The LIVEVOL® Pro Summary is below.



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Mead Johnson Nutrition Company (Mead Johnson) is a pediatric nutrition company. The Company manufactures, distributes and sells infant formulas, children’s nutrition and other nutritional products.

The news hitting the stock and pushing the vol is of a recall from Wal-Mart after an infant tragically died. Here's the news:

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(Reuters) - Mead Johnson (MJN.N) shares fell as much as 12 percent on Thursday following the recall of some of its Enfamil baby formula from Wal-Mart Stores Inc (WMT.N) after the death of a Missouri infant.

[...]

Walmart began the process of voluntarily removing the product used by the infant's family [...]

The product is being held pending an investigation by health officials.

[...]

A growing number of Cronobacter infections among newborns has provided compelling evidence that milk-based powdered infant formulas have served as the source, the department said in a statement.

[...]

"The batch of our product used by the child's family tested negative for Cronobacter when it was produced and packaged, and that has been reconfirmed from our batch records following this news," Mead Johnson spokesman Chris Perille said.

[...]

Even if the product was not tainted, the Enfamil brand is likely to suffer, analysts said.

"Until the issue is resolved - and even for a period of time after - we would expect weak Enfamil sales," said JP Morgan analyst Ken Goldman in a research note. "The question is how bad and how long the perception of tainted formula - right or wrong - will last in the public's mind."

Source: Reuters via Yahoo! Finance: Mead Johnson sinks after Wal-Mart recall. Reporting By Martinne Geller in New York; Additional reporting by Lauren Keiper in Boston and Brad Dorfman in Chicago; Editing by Lisa Von Ahn and Matthew Lewis.
---

At 9:49am EST, theflyonthewall.com via Yahoo! Finance reported that Deutsche Bank called the MJN stock weakness a buying opportunity.

Taking another angle, an article on Forbes.com claims that an MJN director (Robert Singer) purchased stock for $70.28 on 11-21-2011. So, in other words, insiders were buying for $70, then perhaps $6x is a good buy... Ya know, or the company's product line is going to fail. Either way... You can read that full article here: Get An Even Better Deal On MJN Than Director Singer Did

Today, MJN has traded over 31,000 contracts on total daily average option volume of just 3,174. Puts have traded on a nearly 2:1 ratio to calls with the action in the Jan 65 and 60 puts accounting for nearly half the days' volume. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the puts are trading with higher volume than the OI on both lines. Those actually feel like purchases to me for the most part -- which is odd in that those are bets purchasing popping vol and a beaten down stock indicating bets to lower stock and / or higher vol levels.



The Skew Tab snap (below) illustrates the vols by strike by month.



Through all of this craziness, the skew has actually maintained some order -- that is, the shape is normal with the downside puts showing higher vol than the ATM and the OTM calls. The front month is elevated to the back as is the the second to the third. Though it may be a bit early to look past this event, the next earnings release for MJN should be just after Jan expo -- so in Feb. Right now Feb options are priced to about six vol points lower than Jan.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



We can see the drop today in the stock as well as the pop in IV30™ in the bottom portion. The 52 wk range in MJN stock price is [$54.26, $76.53] -- so the price today is not an annual low. The 52 wk range in IV30™ is [19.16%, 45.57%] -- so the implied is trading at an annual high... and then some. Keep in mind that the HV20 (and all HV measures) is recorded close-to-close, so that blue line will pop abruptly in tomorrow's chart.

This is trade analysis, not a recommendation.

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