Venoco (VQ) - Equity and Option Markets Agree; Deal Isn't Done; Vol Diff Opens

VQ is trading $11.11, up 1.1% with IV30™ up 2.0%. The LIVEVOL® Pro Summary is below.



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Venoco, Inc. is an independent energy company primarily engaged in the acquisition, exploration, exploitation and development of oil and natural gas properties.

This is a vol and stock note on a firm that has news of its CEO taking the company private. Let's start with some news and then get to the vol. News:

---
8-16-2012

What: Shares of oil and gas explorer Venoco (NYSE: VQ) jumped 17% today when word leaked out that its CEO is lining up financing to buy the company.

So what: CEO Tim Marquez, who owns 50.3% of shares, has offered to buy the remaining share of the company for $12.50 per share, and he may be moving closer to financing the deal. He is in advanced talks about a $436.5 million package that would include debt, asset sales, and capital raises to buy out the company.

Now what: Since shares closed yesterday at $9.53, the market hasn't had a lot of faith that Marquez's offer would wind up in an actual buyout. But rising energy prices may make a deal easier to pull off; if financing comes through a deal may close as early as September.

Source: The Motley Fool via Yahoo! Finance; Why Venoco's Shares Popped, written by Travis Hoium.
---

On 8-29-2012 S&P cut VQ's credit rating but did remove the rating "from CreditWatch with negative implications and assigned a stable outlook."
Source: S&P via Reuters; TEXT-S&P cuts Venoco's corp credit rating to 'B-'.

Let's turn to 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).



On the stock side I've highlighted the pop on that takeover news. We can see that until then the stock ride was a bumpy one. The 52 wk range for VQ is [$6.50, $12.00], so that takeover price would be an annual high if it gets realized.

On the vol side we can see how the implied dipped slightly on the news. A vol drop would be normal behavior on a takeover bid, the fact that the vol both didn't drop very much and has risen since reflects the option market's pricing of the likelihood of the event occurring. Or, in English, the option market does not reflect a lot of certainty around this takeover in the near-term, and for that matter, neither does the equity market ($11.11 is not $12.50).

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



The skew has maintained a normal shape, but the vol rises from the back to the front monotonically. In English, the option market reflects elevated risk in the near-term (Sep expo.) relative to the intermediate-term (Oct expo) and long-term (Dec expo).

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



Across the top we can see the monthly vols are priced to 110.64%, 81.65% and 62.79% respectively for Sep, Oct and Dec. As a more concrete example of the vol diff, check out the mid-market value for the Sep/Oct 10 put spread. That spread is priced to ~$0.125 in a stock that was trading in the mid 9's a couple of weeks ago. A few minutes before I took that screenshot, the spread's mid-market price was just a dime. The day before the news, that spread was priced to ~$0.85.  This is just another way to examine the difference in risk premia between the front two months -- that is, to use prices rather than vols.

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Best Buy Co. (BBY) - Options Reflect Upside Potential in Near-term; Vol Diff Gaps Open to Upside

BBY is trading $18.14, up 1.6& with IV30™ up 13.9%. The LIVEVOL® Pro Summary is below.



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Best Buy Co., Inc. is a multinational retailer of consumer electronics, computing and mobile phone products, entertainment products, appliances and related services.

This is a vol and skew note on a company embroiled in what appears to be an unwanted private takeover bid from it's ex-Chairman. Let's start with some news, then move onto the vol 'n stuff 'n stuff. I do also note that I wrote about BBY on 7-2-2012; sort of a pre-cursor to today's news. You can read that post here:
Best Buy (BBY) - Stock and Vol Up on LBO "No" News

Here's the news that started this story:

---
(Reuters) - Best Buy Co Inc's (BBY.N) former Chairman Richard Schulze is not expected to present a buyout or other proposal to the company's board anytime soon, a person familiar with the situation said.

Media reports said Schulze was close to presenting an offer for the consumer electronics chain. Discussions around a leveraged buyout of the company are still in the early stages, the person said.

Source: Reuters via Yahoo! Finance; No bid by Best Buy ex-chairman to come soon: source, reporting By Nadia Damouni; editing by Gerald E. McCormick.
---

So that was sort of no news with news expected soon, but denied. But here are some headlines from Briefing.com in chronological order (Provided by Briefing.com (www.briefing.com)):

06-Jul-12 15:23 ET: Best Buy to layoff 2400 employees - CNBC

11-Jul-12 09:33 ET: HHGregg at a 3.5 year low following Q1 warning and FY13 guidance cut, now off ~32% (7.80 -3.74) -Update BBY -6%

13-Jul-12 09:42 ET: Best Buy trading lower off the open; Hearing cautious comments at Cleveland Research

30-Jul-12 08:44 ET: Best Buy spikes to $20 then comes back to ~$19 following renewed takeover reports;

30-Jul-12 08:43 ET: Best Buy founder Schulze recruting executive team for buyout - Bloomberg

06-Aug-12 08:35 ET: Best Buy Founder Richard Schulze confirms proposal to acquire BBY for $24.00 to $26.00 per share

Richard Schulze, Founder and former Chairman of BBY, submitted a written proposal to the Best Buy Board of Directors to acquire all of the outstanding shares of the company that he does not already own for a price of $24.00 to $26.00 per share in cash. The purchase price, which is based on current public information and is subject to due diligence, represents a premium of 36% to 47% to Best Buy's closing stock price of $17.64 on August 3, 2012. Schulze is Best Buy's largest shareholder, controlling 20.1% of Best Buy shares.
---

And finally, the news today:

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29-Aug-12 07:08 ET: Best Buy: Buyout feasible albeit unlikely - Oppenheimer

OpCo notes clients continue to ask whether the firm believes former BBY chairman Richard Schulze will prove successful in his attempt to take the Co private. The BBY situation is clearly fluid. Shares are likely to remain susceptible to an ongoing deluge of data from BBY and its potential suitors. In the end, firm views a deal to purchase Best Buy as unlikely. Ample cash flow and a still healthy balance sheet suggest that BBY could support the added leverage associated with a leveraged buyout (LBO). OpCo believes, however, that potential private equity buyers will ultimately balk at a deteriorating business model that is increasingly falling victim to the inroads of new non-traditional CE competitors and a weak product cycle.

Provided by Briefing.com (www.briefing.com)
---

OK, let's actually look at what's going down with the options. Ultimately, it's the skew that caught my attention, but let's start with 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).



On the stock side we can see the decline from ~$28 in late March, to now in the $18 range. While the ride has been bumpy, BBY is down from $25.43 as of one year ago, or a -28.7% move. At one point in the last two years, BBY was trading near $45 a share. The 52 wk range in stock price is [$16.25, $27.89].

On the vol side we can see a rather bumpy ride in the implied as well. Most notably however is the move today -- a significant pop raising the vol to the 85th percentile (annual). The 52 wk range in IV30™ is [29.46%, 73.33%].

Let's turn to the Skew Tab where we can see a phenomenally interesting term structure.



We can see that the $16 strike puts are all priced pretty similarly across the front three months. Then there's an awesome upside skew in the Sep options, a noteworthy but less abrupt upside skew in the Oct options and then a downward sloping upside skew in the Dec options.

Simply stated, the option market reflects substantially greater upside risk (potential) in Sep than Oct, and in Oct than in Dec. Extrapolating a bit of meaning into this, we might also say that the option market reflects the takeover / private decision / ordeal will be over by Dec expo.

As a definitive example of how much the skew shape has changed with the news headlines over the last two months (above), I've included the Skew Tab from 7-2-2012, below:



We can see a parabolic shape to the Jul options and a vol diff that was beginning to open up between the OTM calls in each month, but the shape has changed considerably. Note how the OTM puts were still priced higher than the ATM options in both expiries back in early Jul and how that is clearly not the case right now. Very cool.

Let's turn to the Options Tab, for completeness.



We can see the monthly vols across the top are priced to 67.78%, 63.35% and 59.54%, respectively for Sep, Oct and Dec. Looking more closely, we can see the vol diff between the Sep and Oct OTM calls, getting as large as 17 vol points in the Sep/Oct 25 call spread (while the ATM vol diff is just five vol points).

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Netflix (NFLX) - Depressed Vol; Does Vol Trend Make Sense into Sep & Oct?

NFLX is trading $62.90, up 0.8% with IV30™; down 2.5%. The LIVEVOL® Pro Summary is below.



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Netflix, Inc. (Netflix) is an Internet subscription service streaming television shows and movies. The Company’s subscribers can watch unlimited television shows and movies streamed over the Internet to their televisions, computers and mobile devices, and in the United States, subscribers can also receive digital versatile discs (DVDs) delivered to their homes.

This is a quick vol note in a company that has seen its stock price tumble from as high as $300 (intra-day high) to now in the low 60's in just over a year. 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).



On the stock side I note three phenomena:

1. For the two earnings cycles in the last six months, we can see rather abrupt gaps down. Specifically:

4-24-2012: The stock dropped from $101.24 to $87.68 (13.4%) (close-to-close)
7-25-2012: The stock dropped from $80.39 to $60.28 (25%) (close-to-close)

2. The stock was trading over $120 as recently as late March of this year and is down nearly 50% from those levels. The catalysts to the moves down have been earnings (see #1 above).

3. As of late, the stock has found a rather quiet period following the disaster that was the last earnings cycle on 7-25-2012 (earnings were released 7-24-2012 AMC). In fact, the stock tends to have these quiet periods, then abrupt moves (usually down and usually off of earnings).

On the vol side we can see three phenomena as well.  Specifically:

1. The implied is now trading very close to an annual low. The 52 wk range in IV30™ is [45.29%, 93.63%], putting the current level in the 3rd percentile (annual). It's the level of the implied that caught my attention today.

2. The short-term historical realized vol (HV20™) is down to 35.06% and the HV10™ is now down to 29%. In English, while the implied is near an annual low, the very short-term realized vol is even lower. See... a quiet period...

3. The long-term historical realized vol is 68.82%, substantially elevated to both the implied and the short-term historical realized levels.

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



NFLX does tend to have this parabolic skew shape where both the upside and downside are priced to higher vol than the ATM options. This does reflect upside risk (potential) that is higher than a "normal" skew. You can read about option skew here:
Understanding Option Skew -- What it is and Why it Exists .

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



Across the top we can see the monthly vols are priced 46.40% (Sep) and 50.29% (Oct). The next earnings release for NFLX should be in late Oct, but after Oct expo. That Dec vol is elevated at ~58% likely due to that next earnings date. An interesting question to ponder is whether the "quiet" period trend for NFLX up until earnings will hold through the months of Sep and Oct -- months which may have elevated systematic risk (regardless of firm specific risk). Whichever way you lean, an interesting trade analysis develops with that depressed vega.

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YELP - Elevated Vol Nears All-time High as Stock Drops

YELP is trading $19.21, down 1.4% with IV30™; up 2.8%. The LIVEVOL® Pro Summary is below.



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This is a vol note on a stock that is hitting all-time highs in the implied as the stock is dipping. Let's start with the Charts Tab (six months) is 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 how far the equity price has declined of late. On 8-8-2012, this stock closed at $26.46 and as of this writing the stock is down more than 27% from that level. Earnings were announced on 8-1-212 (AMC) and the next day the stock did rally up from $18.82 to $22 or ~17% on that news. The 52 wk range in stock price is [$14.10, $31.96].

Turning to the vol side we can see how elevated the implied got into earnings, then how it came in after (normal behavior). What's interesting (and caught my attention) is the vol rise of late. On 8-15-2012 the IV30™ closed at 70.47% (and the stock closed at $22.11). As of this writing the implied is over 114%, or a rather awesome 62% rise in less than two weeks. The 52 wk range in IV30™ is [50.42%, 115.96%], putting the current level right on that annual high.

Let's turn to the Skew Tab to examine the month-to-month and line-by-line vols for the front two expiries.



While there is some bumpiness to the curves, the shape is basically normal. I do note how elevated the front month is to the back. The option market reflects elevated risk in the near-term (to Aug expiry) relative to the intermediate term (out to Sep expiry). This is a bit odd in that Aug vol does have a tendency to sort of fall asleep as late Summer can be a slow month, while early Fall (Sep) does tend to show higher vol. As a proxy, the VIX Aug options reflect ~18.30%, while Sep options reflect 22.85%.

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



We can see across the top that the monthly vols are priced to 117.23% and 99.44% respectively for Sep and Oct expiries. Something is a foot for YELP...

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Electronic Arts (EA) - Vol and Stock Pop on Private Equity Rumor; Calls Trading; Skew Bends

EA is trading $13.74, up 5.0% with IV30™ up 26.6%. The LIVEVOL® Pro Summary is below.



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Electronic Arts Inc. develops, markets, publishes and distributes game software content and services that can be played by consumers on a variety of video game machines and electronic devices (platforms).

This is a vol and order flow note very much like the one I posted yesterday on HUN. The news is a rumor of a private equity firm's interest in taking the company over. However, CNBC also reported that the rumored firm has explicitly denied the claim. You can read the post from yesterday with similar order flow and vol movement, here:
Huntsman (HUN) - Vol Explodes, Skew Shifts Dramatically on Call Purchases... But, Why?

Let's start with the order flow for EA today. The company has traded nearly 75,000 contracts on total daily average option volume of just 5,424. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates the action. We can see that over 20,000 Sep 16 calls have traded and nearly 10,000 Sep 15 calls have also traded. The Sep 15's look like purchases, while the Sep 16's are more ambiguous b/c of that one large print sent back by the exchange with an NBBO that's outside the execution price. My best guess is that that was a call purchase, likely done with stock. When looking down the entire option chain for EA, I don't see any OI larger than ~8,000, so both the Sep 15 and Sep 16 call interest if one-sided is very large.



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



Here's where it gets really interesting. We can see two things today which we didn't see yesterday. First, I've included the Skew Tab from yesterday below, then some commentary.



Two stark differences:
1. The front month (red) is substantially higher today than it was yesterday. In fact, the Aug options went from priced below the back two months (in terms of vol), to above. The change in Aug IV today is +30.5 vol points to 66.42%, or nearly a doubling overnight.

2. While the Sep and Dec ATM options remain about evenly priced (in terms of vol), the upside in Sep is now substantially elevated to Dec, exhibiting a reverse skew (vol rising to the OTM calls). As I said yesterday (and several times prior), this is my favorite part of option trading -- watching the price discovery evolve in the volatilities by month, by strike as news comes out. In English, the near-term upside risk (potential) as reflected by the option market is substantially higher in Sep then Dec.

To read more about Option Skew, you can check out this post:
Understanding Option Skew -- What it is and Why it Exists .

Finally, the Charts Tab (six months) is 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 pop today, as well as the nice recovery over the last month (is). Up until the end of July, this stock had been on an essentially straight line downward path over the last half year. The 52 wk range in stock price is [$10.77, $26.13].

On the vol side we can see the pop in the implied today -- rather substantial. The 52 wk range in IV30™ is [33.66%,63.17%], putting the current value in the 35th percentile.

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Huntsman (HUN) - Vol Explodes, Skew Shifts Dramatically on Call Purchases... But, Why?

HUN is closed at $14.48, up 6.6% with IV30™ up 46.4%. The LIVEVOL® Pro Summary is below.



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Huntsman Corporation is a manufacturer of differentiated organic chemical products and of inorganic chemical products. The Company operates its businesses through Huntsman International LLC (Huntsman International).

This is a quick vol and stock note with some order flow in the calls. Let's start with the order flow. The company traded 40,749 contracts on total daily average option volume of just 4,066. Calls traded on a 10:1 ratio to puts with the bulk of action in the action in the Sep 16 calls. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the Sep calls are mostly opening (compare OI to trade size). Those look like substantially purchases to me. When looking down the entire option chain for HUN, I don't see any OI much larger than half the volume in the Sep 16's, so the activity is very large.



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



This is a great skew chart -- we can see how the upside calls in Sep are priced to higher vol than the ATM options and the OTM puts. The first large kink upwards is right on that Sep 16 call line. In English, the skew shape has changed dramatically based on the order flow today. I've included the Skew Tab from yesterday (below) as a clear demonstration of this shift in skew.



This is my favorite part of option trading -- the price discovery that happens as order flow changes the shape of the skew. Pretty damn cool...

Finally, the Charts Tab (six months) is 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 how bumpy the ride has been over the lat six months, yet the return has been right around flat line. I've highlighted the pop today. The 52 wk range in stock price is [$7.92, 15.85], so the current level is quickly approaching a new annual high.

On the vol side we can see how depressed the implied was as of yesterday, and the incredible rise today of nearly 50%. The 52 wk range in IV30™ for HUN is [35.17%, 90.56%], putting the current level in the 36th percentile (annual).

The thing about all this order flow, skew shift and vol move "stuff" is.. I can't really find any news. It feels like takeover spec flow, though the vol rise is incredible and certainly unusually large even for a takeover rumor. Having said that, I really don't know what's going on.

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Walgreen (WAG) - Vol Hits Multi-year Lows Following Dispute Settlement

WAG is trading $35.74, down small with IV30™ unched. The LIVEVOL® Pro Summary is below.



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Walgreen Co. (Walgreen), together with its subsidiaries, operates a drugstore chain in the United States. The Company provides its customers with multichannel access to consumer goods and services, and pharmacy, health and wellness services in communities across America.

I know I don't normally write about 19 vol stocks, but this one caught my attention in an otherwise slow day. 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).



On the stock side, we can see how volatile the ride has been. Here are the three moves I've highlighted:

4-17-2012: Stock went from $33.30 to $35.07, up 5.3%.

6-18-2012 --> 6-20-2012: Stock went down from $31.96 to $29.21, down 8.6% on earnings.

7-19-2012: Stock went up from $30.97 to $34.62, up 11.8%.
Here's a news snippet from that day:

---
LOS ANGELES (MarketWatch) — Shares of Walgreen Co. made double-digit percentage gains Thursday after the drug retailer announced it had ended a seven-month dispute with Express Scripts Holding Co. and will now start to take the pharmacy-benefit manager’s customers.

Investors bid the shares nearly 12% higher in recent action to $34.62, rallying as Walgreen (US:WAG) brought the feud to a halt. Express Scripts (US:ESRX) also climbed, adding nearly 2% to $58.76.

But the peacemaking had a detrimental effect on shares of CVS Caremark Corp. (US:CVS) and Rite Aid Corp. (US:RAD), Walgreen’s rivals.

Rite Aid tumbled by more than 6% to $1.20, while CVS Caremark also dropped more than 6% to $45.43. The two companies had been taking Express Scripts customers away from Walgreen.

Source: Marketwatch via Yahoo! Finance; Walgreen soars as dispute ends, but rivals fall, written by Russ Britt.
---

So, in totality, the stock has had some volatile days. Looking to the vol portion of the Charts Tab, though, we can see how depressed the implied is to both the short-term and long-term historical realized vols. Before today, the 52 wk range in IV30™ was [19.09%, 46.38%], so the level today is a new annual low. In fact, it's at least a two year low. Granted, the Express Scripts dispute ended n' stuff, but still, a multi-year vol low right now... It makes sense, yet is noteworthy, if that makes any sense.

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



The skew is normal, with the back two expiries demonstrating a normal skew shape and the front showing a parabolic shape, which isn't uncommon three and a half trading days from expo.

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



We can see the monthly vols across the top are priced to 18.24%, 19.00% and 23.52%, respectively for Aug, Sep and Oct. An interesting set up could be to follow the trend with low vols and fund an earnings month long option position with front month sales and then rolling them after each expo. I'm not saying this is a good trade, I'm just trying to add some color.

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LinkedIn (LNKD) - Should Risk be at Lowest Levels... Ever?

LNKD is trading $104.20, down 0.4% with IV30™ down 0.9%. The LIVEVOL® Pro Summary is below.



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LinkedIn Corporation (LinkedIn) is a professional network on the Internet with more than 90 million members in over 200 countries and territories. Through the Company’s platform, members are able to create, manage and share their professional identity online, build and engage with their professional network, access shared knowledge and insights, and find business opportunities.

This is a vol note, specifically low vol in a stock that has had a recent history of large moves. I found LNKD using a real-time custom scan that hunts for low vols.

Custom Scan Details
Stock Price GTE $10
IV30™ GTE 30
IV30™ Percentile LTE 10
IV30™ - HV180™ LTE -7
Average Option Volume GTE 1,200

The goal with this scan is to identify short-term implied vol (IV30™) that is depressed to the long-term stock movement (HV180™) was well as its own history. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume) and minimum level of vol so the examination is more interesting.

The LNKD 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 nice return over the last six months, when LNKD closed at $85.10. More recently, I've highlighted the move into and then out of earnings on 8-2-2012 AMC.

First, for the three days prior to earnings, the stock fell from $104.18 (7-30-2012) to $93.51, or just over 10% in three trading days. Then, after the earnings announcement, the stock popped $15 or 16%. Here's a news snippet from that result:

---
What: Shares of business-focused social network LinkedIn (Nasdaq: LNKD) were getting a big raise today, gaining as much as 16% in intraday trading after the company reported second-quarter results.

So what: Revenue for the quarter ended in June was up a scorching 89%, to $228 million, even as profit fell sharply from $4.5 million last year to $2.8 million. On an adjusted basis, the company earned $0.16 per share during the quarter, which met analysts' estimates. Revenue was well above the $216 million Wall Street was looking for.

While the company is obviously attracting a lot more business, it's paying the price right now, as its bottom line reveals. LinkedIn has been hiring heavily and increasing marketing spend, which is tough on short-term profits, but hopefully going toward building a strong company for the long term.

Source: The Motley Fool via Yahoo! Finance; Why LinkedIn's Shares Popped, written by Matt Koppenheffer.
---

Moving to the vol, we can see how elevated the implied got into earnings, reaching over 90% in the IV30™ and over 265% in the Aug03 weekly options. Even that elevated vol only reflected a $12 move in a one-day move off of earnings, which in hindsight was still too low.

Following earnings, the implied collapsed (which is normal and expected), and since then has found a quiet equilibrium at ~42%. I note that the 52 wk range in IV30™ is [41.12%, 93.56%], putting the current level in the 2nd percentile (annual). In English, the implied is now trading right on an annual low, which is in fact an all-time low. So, I guess the question is, "Should LNKD risk right now be lower than it's ever been since it went IPO?"

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



We can see a normal skew shape, quite pretty, really. No single strike or expiry shows any obvious discrepancies or kinks. You can read more about skew here:
Understanding Option Skew -- What it is and Why it Exists .

Finally, let's look to the Options Tab (below).



We can see that the monthly vols are priced to 42.43%, 42.52% and 50.51%, respectively for Aug, Sep and Nov. The next earnings release is likely in early Nov which explains the elevated vol. Ultimately this is a compelling stock due to it's depressed implied. It's hard to imagine guessing that vol would be at an all-time low after such a volatile move into and then out of earnings while we approach the Fall. But we don't have to imagine it -- it's real...

Possible Trades to Analyze

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Yandex (YNDX) - Vol Diff Opens in Russian Internet Company

YNDX is trading $20.36, down 1.3% with IV30™ ucnhed. The LIVEVOL® Pro Summary is below.



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Yandex N.V. (Yandex) is an Internet company in Russia. During the year ended December 31, 2011, the Company generated 63.3% of all search traffic in Russia, and 60.6% in December 2011, and its Yandex sites attracted 45 million visitors in December 2011. It also operates in Ukraine, Kazakhstan, Belarus and Turkey.

This is a quick vol note in a rather obscure name -- a Russian Internet company. Specifically, I'm looking at the vol diff between the front two months. First, 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).



On the stock side, we can see how the price has dropped from the $28 range in mid-April, to now just above $20. More recently, there was an earnings release on 7-31-2012 BMO and the stock fell from $20.83 to $19.23, or 7.7% in a day. Here's a news snippet from that day:

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Yandex NV (YNDX) led declines in Russian stocks traded in New York, as the benchmark index fell by the most in a week, on concern sales growth for the nation’s biggest Internet search engine will slow in the second half of the year.

The Russian company dropped the most in eight months yesterday, tumbling 7.7 percent to $19.23, and paring its gain in July to 0.9 percent. The Bloomberg Russia-US Equity Index (RUS14BN) of the most-traded Russian companies listed in the U.S. slumped 2.1 percent to 90 yesterday, the biggest decline since July 23. The RTS stock-index futures expiring in September lost 0.4 percent to 136,405.

Yandex reiterated its forecast for 40 percent to 45 percent revenue growth in 2012, after sales rose 50 percent in the first half of the year.

Source: Bloomberg via Yahoo! Finance; Sales Disappointment Sinks Yandex as ADRs Drop: Russia Overnight, written by Halia Pavliva.
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On the vol side, we can see how elevated the implied got into earnings and how steep the drop off was after. Since then the implied has found a sort of quiet period, hovering around the 45% area for the last few trading sessions.

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



I've only included the front two expiries to highlight the vol phenomenon that caught my attention. We can see how elevated the front is to the back, as well as the upside skew in the Aug options, creating an even larger vol diff between the Aug/Sep upside. Having said that, that upside skew is simply a reflection of a nickel bid -- so you can kind of "ignore" that shape discrepancy. To learn more about skew, you can check this article out:

Understanding Option Skew -- What it is and Why it Exists.
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Finally, let's turn to the Options Tab for completeness.



Across the top we can see the monthly vols are priced to 54.67% and 44.67% for Aug and Sep, respectively. More specifically, the Aug/Sep 20 put spread shows a ~10.5% vol diff, while the Aug/Sep 21 call spread shows a ~8% vol diff.

This is trade analysis, not a recommendation.

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