Thursday, April 5, 2012

Norfolk Southern (NSC) - Depressed Vol into Earnings; Vol "Agnosticism?"

NSC is trading $67.30, up 0.5% with IV30™ down 1.5% as of ~10:45am EST. The LIVEVOL® Pro Summary is below.


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Norfolk Southern Corporation (Norfolk Southern) is a Virginia based company that controls a railroad, Norfolk Southern Railway Company.

This is a vol note with earnings approaching. Let’s start with the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Keeping in mind that this is a 24% vol stock, look to the stock portion. The ride has been a bit bumpy over the last six months. We can see an earnings gap on 10-27-2011, when the stock went from $69.77 to $75.16. Two quarters prior to that, the stock gapped as well, going from $68.41 to $73.87 (4-28-2011).

Looking to the vol portion, we can see that the implied has been dipping for the last six months. The 52 wk range in IV30™ is [19.35%, 48.31%], putting the current level in the 15th percentile. While we see depressed vol right now, note that the next earnings release for NSC is confirmed by Livevol® for 4-24-2012 (AMC).

Let’s turn to the Skew Tab.

We can see a normal skew shape across the front expiries. Apr vol is slightly depressed to May (with earnings), as is Jun. I do note that the ATM vols are quite similar across the expiries – odd given the earnings event and its certainty (in terms of date).

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

I wrote about this one for TheStreet (OptionsProfits), so no specific trade analysis here. Looking across the top of the tab, we can see 22.34%, 25.54% and 24.82% for the Apr, May and Jun expiries, respectively. The 52 wk range in stock price for NSC is [$56.86, $77.99], so the current level is pretty much in the middle. Being totally vol agnostic, it feels like a 50-50 bet that the stock moves big on earnings given the last four earnings cycles... but of course, there's no such thing as vol agnosticism trading options.

This is trade analysis, not a recommendation.

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1 comment:

  1. Very impressive. Thanks for sharing such valuable financial information.