Ocwen Financial (OCN) - Multi Year Highs in Vol and Price as Earnings Approach

OCN is trading $27.34, down 1.5% with IV30™ up 2.5%. The LIVEVOL® Pro Summary is below.



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Ocwen Financial Corporation (Ocwen), through its subsidiaries, is a provider of residential and commercial mortgage loan servicing, special servicing and asset management services.

This is a vol note, specifically a firm that is breaching a new multi-year high in vol.  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 impressive rise in price rising from $15.80 on 3-28-2012 to now over $27. As of this writing, the stock is up 73% over the last six months. We can also see that in the last earnings cycle (check out the blue "E" icon) OCN moved higher on the news. The 52 wk price range is [$11.72, $28.66], so the stock is nearing an annual high, and in fact, that annual high is a multi-year high. But the story gets more compelling when we turn to the vol.

On the vol side we can see how elevated the implied has become -- shooting straight up from 35.96% on 9-21-2012 to now just under 59%. That's a 63.5% rise in IV30™ in just seven calendar days. The only news story I could find was one from Briefing on 9-19-2012. I've included that snippet below:

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Compass Point is initiating coverage of NationStar Mortgage (NSM) with a Buy and a $38 tgt, Walter Investment (WAC) with a Buy and a $46 tgt, and Ocwen Financial (OCN) with Buy and a $33 tgt. Firm says while these names have had a huge run lately and valuations have been stretched, the longer-term opportunity for the special servicers outweighs the near term volatility that may occur. Each of these names will likely participate in the secular shift away from the traditional servicing model, because there is still a massive backlog of distressed mortgages that need to be cleared, Basel III will limit banks ability to justify keeping large servicing portfolios, and regulatory compliance has become costly and creates operational risk.

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

So there you go... What's interesting about the vol is that this 59% (ish) level is in fact not just an annual high, but a two year high (at least two years).

Let's turn to the Skew Tab.



We can see that Oct is depressed to Nov -- that's a reflection of the next earnings report which is due out in late Oct (but after Oct expo). The back two months do show a rather flattish skew, which in terms of the broader market isn't "normal." The option market does not reflect greater downside risk than upside potential -- an interesting phenomenon to note given the rise in equity price and vol.

You can read about skew and why it exists here: Understanding Option Skew -- What it is and Why it Exists.

Finally, let's turn to the Options Tab.



Across the top we can see the monthly vols are priced to 53.16% and 70.80% for Oct and Nov, respectively. Note that as we move closer to Oct expo, two things will likely happen.

1. IV30™ will likely rise as the weighted average turns to focus on Nov (and earnings).
2. Nov vol will rise as the "non-earnings" days go away and the expiry turns more into a more concentrated earnings event.

In English, this multi-year high in the implied is likely to rise -- and rather significantly.

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MetroPCS (PCS) - Takeover Spec Pushes Vol and Skew; Earnings Vol Forgotten?

PCS is trading $11.89, up 5.7% with IV30™ up 19.4%. The LIVEVOL® Pro Summary is below.



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MetroPCS Communications, Inc. (MetroPCS Communications) is a facilities-based wireless broadband mobile communications provider in the United States, including the Atlanta, Boston, Dallas/Fort Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco, and Tampa/Sarasota metropolitan areas.

This is a vol note -- specifically spiking IV30™ on the day. We'll examine the impact of he day on the skew and compare it to yesterday as well. But, 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 that awesome price appreciation since the earnings announcement in late July. On 7-25-2012, the stock closed at $6.28, so as of this writing the stock is up over 89%.

On the vol side we can see a fairly muted move in the implied up until the last few days. On 9-20-2012 the IV30™ closed at 45.24%. As of this writing that measure is up nearly 42%. The stock in that same time frame is up small (ish) from $11.19 to $11.89, or just 6.25%. In English, the option market reflects substantially higher risk as the equity price has been sitting relatively still.

Let's turn to the Skew Tab today (first) and then below that,the skew from the day before (9-26-2012).





We can see quite clearly how the front month (the red curve) has spiked today above Nov (yellow curve). And the news is a report from Bloomberg that PCS has been in talks with suitors (for a takeover) -- specifically naming S, DISH and DTE. Source: MetroPCS Jumps After DealReporter Renews Buyout Speculation; written by Scott Moritz.  I also note the upside calls in Oct are priced to higher vol than those in Nov.

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



Across the top we can see how Oct and Nov vol have now evened out with Oct up 13 vol points (not percent) and Nov was up just 2.9 vol points. This is noteworthy for a very simple reason: the next earnings release for PCS is due out in Nov (and not Oct) and now the two months share the same vol. Very, very, tricky... Looking to the upside calls, the Oct/Nov 13 call spread (for example) shows a vol diff in favor of Oct (without earnings). Hmmm....

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Big Lots (BIG) - Depressed Vol in Gapping Stock with a Downturn Trend

BIG is trading $29.69, up 0.3% with IV30™ up 0.5%. The LIVEVOL® Pro Summary is below.



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Big Lots, Inc., through its wholly owned subsidiaries, is a North America's closeout retailer. At January 28, 2012, the Company operated a total of 1,533 stores in two countries: the United States and Canada.

I found BIG using a real-time custom scan. This one hunts for low vols. But this one is compelling b/c of how violently the stock has gapped in the last six months.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV60™ GTE 1
IV60™ - HV60™ LTE -8 and GTE -40
HV180™ - IV60™ GTE 8
Average Option Volume GTE 1,200
Industry != Bio-tech

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol Pro&#8482.



The goal with this scan is to identify intermediate-term implied vol (IV60™) that is depressed both to the intermediate stock movement (HV60™) 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) and want to avoid bio-techs (and their crazy vol).

The BIG Charts Tab is included (below). The top portion is the stock price, the bottom is the vol: IV60™ - yellow vs HV60™ - blue vs HV180™ - pink.



On the stock side we can see those two awesome gaps down in the last six months. on 4-24-2012, the sock dropped from $45.71 o 34.71 (-24%) and on 8-23-2012 from $38.84 to $30.76 (21%). The second drop was on an earnings release. The first was on a changed outlook (same stores quarterly sales revised down). I also note the recent down trend in stock price. On 9-14-2012, the stock traded as high as $31.90 and closed at $31.83.  today, we're at $29.69.

On the vol side we can see how the IV60™ has remained fairly calm throughout the last six months and is in fact kinda "lowish" right now relative to the recent past. The HV60™ is artificially elevated b/c of the earnings cataclysm. Having said that, he HV10™ is still elevated o IV60™, so there is a reasonable vol diff here to investigate. The comps are:

We can see:
IV60™: 32.60%
HV60™: 53.65%
HV180™: 50.62%
HV10™: 32.89%

The IV30™ is in the 34th percentile (annual) -- so it's also a bit low relative to the annual range and this is as the stock has started a downtrend.

Let's turn to the Skew Tab.



We can see a normally shaped skew, with the two months lying on op of each other. The next earnings cycle is due out in Dec, so neither of the front two expiries have that vol event. I'm not sure when the outlook numbers come out though, and given the reaction in April, I'd look that date up before trading this name.

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



Across the top we can see the monthly vols are priced to 31.59% and 31.69% for Oct and Nov, respectively. It's an interesting position to analyze going long Nov juice and selling Oct juice in the hopes that either, a big move comes after Oct, or no move comes but the vol rises in Nov given that it is depressed relative to the historical measures.

This is trade analysis, not a recommendation.

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VeriFone (PAY) - Depressed Vol as Stock Gaps Down

PAY closed at $30.02, down 3.4% with IV30™ up 1.4%. The LIVEVOL® Pro Summary is below.



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VeriFone Systems, Inc. (VeriFone), formerly VeriFone Holdings, Inc., is a holding company for VeriFone, Inc. The Company is engaged in the secure electronic payment solutions.

This is a vol note, but this time low vol. I found PAY using a real-time custom scan. This one hunts for low vols.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV60™ GTE 1
IV60™ - HV60™ LTE -8 and GTE -40
HV180™ - IV60™ GTE 8
Average Option Volume GTE 1,200
Industry != Bio-tech

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 intermediate-term implied vol (IV60™) that is depressed both to the intermediate stock movement (HV60™) 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) and want to avoid bio-techs (and their crazy vol).

The PAY Charts Tab (vol only) is included (below). The top portion is the stock price, the bottom is the vol; (IV60™ - yellow vs HV60™ - blue vs HV180™ - pink).



On the stock side we can see the abysmal returns over the last six months. On 3-26-2012 this was a $52.03 stock. As of this writing (the close today), the stock is down more than 42%. Included in this six month stock chart are two earnings reports -- both of which saw gaps down off of the news. Basically, not good results for PAY shareholders recently. It's that performance with the vol that caught my attention.

On the vol side we can see how depressed the IV60™ is relative to the two historical realized measures HV60™ and HV180™. In fact, even HV20™ and HV30™ are considerably higher than the 60-day implied. The vol comps are:

IV60™: 41.00%
HV20™: 62.21%
HV30™: 53.84%
HV60™: 58.03%
HV180™: 52.16%

So we can see that across the board the IV60™ is well depressed to the recent and long-term stock movement.

Let's turn to the Skew Tab.



The red curve represents Oct while the yellow curve represents Nov. We can see a rickety albeit normally shaped term structure, with the Nov options priced to higher vol than Oct. I believe that the next earnings release should be in Dec, so the elevated Nov vol is not a reflection of that vol event.

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



Across the top we can see Oct vol is priced to 38.62% while Nov is priced to 40.59% -- so a slight elevation from Nov to Oct. Ultimately, the low vol (both IV60™ and IV30™) are compelling. Even though we're looking further out, the IV30™ is in the 27th percentile (annual) -- granted, this is right after earnings, so that number isn't necessarily weird.

This is trade analysis, not a recommendation.

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MIPS Technologies (MIPS) - Dipping Elevated Vol; Upside Skew Reverses with Earnings Month

MIPS is trading $7.31, down small with IV30™ down 9.8%. The LIVEVOL® Pro Summary is below.



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MIPS Technologies, Inc. (MIPS), incorporated in June 1992, is a provider of industry-standard processor architectures and cores for digital home, networking and mobile applications.

This is a vol note -- specifically dipping elevated vol. Let's start with the 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 a rather bumpy ride, though I do note the vertical axis scale -- the increments are in $0.20 pieces. Over the last month, MIPS has risen from $6.32 to now just under $1 higher -- so 15.7% higher. But, the real issue at play is the vol.

We can see that for the last several months, MIPS implied has traded above both the short-term and long-term historical vols. What I note now, however, is how that normally elevated vol is dipping. In English, that spread of implied to historical is shrinking as the stock has made its nice run up in Sep. Then there's the issue of earnings -- which are due out after Oct expo (so in Nov) -- that's a projection, not a fact.

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



The red curve represents Oct, while yellow is Nov. We can see an awesome upside skew shape to both of the font months - the option market reflects greater upside risk (potential) than downside risk in the near and medium term options. Even more interesting is that the Oct upside calls are priced to higher vol than the Nov OTM options while the next earnings release is due out in Nov. So, in English, while Nov has the embedded vol event, the Oct OTM options are priced higher (in terms of vol). All of this is occurring as the implied is dipping -- hmmm....

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



Across the top we can see that Oct vol is priced to 73.2% while Nov is priced to 75.88%. But, looking more closely at the chain, we can see that the Oct/Nov 9 call spread (for example), shows a 6 point vol diff -- Oct is priced above Nov. In English, we can put a real value on the vol diff to the upside skew we observed in the Skew Tab. Very cool... And... note worth, IMHO.

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FX Energy (FXEN) - Vol Elevates to Multi-Year highs; Oct Vol Reflects Risk Right Now

FXEN closed at $7.71, was down small with IV30™ up 3.4%. The LIVEVOL® Pro Summary is below.



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FX Energy, Inc. is an independent oil and gas exploration and production company with production, appraisal, and exploration activities in Poland.

This is a vol note, specifically elevated vol. Let's start with the Charts Tab (six months), 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 performance over the last six months as this company has gone from $5.69 to a close of $7.71 today or up 35.5% in that time period. But the vol is the story.

On the bottom half of the chart we can see how extraordinarily elevated the implied has become. The level of the IV30™ is well into 2-year high territory at 143.24%. I note that as the implied has been rising, the stock has found a quiet period -- the HV20™ is just at 54.82%.

In terms of news, I see are a new disclosures (8-K Reg FD) and an update on a number of different operations/facilities in Poland, but not a whole lot else.

Let's turn to the Skew Tab.



Red represents the Oct options while yellow represents the Dec cycle. We can see that both months demonstrate an upside skew, where the OTM calls are priced to higher vol than the ATM options (reverse skew). But even more noticeable, the vol diff between the two months has grown quite large. Something is coming in Oct according to the options, and whatever it is, the risk reflected by the options is greater than at any time over the last two years (at least).

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



Across the top we can see that Oct vol is priced to 145% while Dec is priced to 108.19%. I do note that even that Dec vol number would be a two-year high in implied if not for the recent run up.

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--- DISCLAIMER --
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Herbalife (HLF) - Vol Pops, Stock Drops, What's Next?

HLF is trading $47.13, down 5.0% with IV30™ up 15.4%. The LIVEVOL® Pro Summary is below.



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Herbalife Ltd. is a global network marketing company that sells weight management, nutritional supplements, energy, sports and fitness products and personal care products through a network of approximately 2.7 million independent distributors, except in China, where the Company sells its products through retail stores.

This is a vol note, specifically rising vol as the stock dips. But even as the implied his risen, it's still depressed to its own history. More on that in a sec.

I found HLF using a custom scan searching for names where IV30™ is up at least 10% on the day. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.



The HLF 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 it's pretty hard to miss the collapse in late Apr / early May. From 4-30-2012 to 5-15-2012. The stock dropped from $70.32 to $42.44 or 40%. The next day, the stock popped to $49.51 (~+17%), only to drop again to $44.58 the day after that.

The news surrounding HLF often times surrounds their distribution channels / distributor groups and maybe more importantly, how noted short seller David Einhorn has his eye on them. Here's a quick snippet from an article by The Motley Fool on 5-1-2012:

---

What: Shares of nutrition products specialist Herbalife (NYSE: HLF ) weren't looking very healthy today as they fell as much as 26% in intraday trading.

So what: With an earnings-release title that read "Herbalife Ltd. Announces Record First Quarter 2012 and Raises 2012 Earnings Guidance" you wouldn't guess that it'd be such a rough day for Herbalife shareholders. To be sure, first-quarter earnings per share did manage to impress. The $0.88 that the company reported bested the $0.81 that analysts were looking for.

Now what: But forget about all of that for a moment, because what really had investors shaking in their boots today was the fact that famed short-seller David Einhorn materialized on the Herbalife conference call and started asking management some very pointed questions. One specific area of inquiry was why the company had stopped breaking out its distributor groups -- something that it'd done prior to the recent annual filing. The market's assumption seems to be that if Einhorn is on the call asking those types of questions then he's either building a short case against the company, or else is already short.

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

Since that incredible ride (mostly down), the stock has actually found a bit of a quiet period. HV20™ has dropped from nearly 120% to now just 24.16%. but then, there's today...

On the vol side, we can see how elevated the implied got during that Einhorn scare, then dipped and rose into earnings (which is normal). All looked calm until today.

We can see how the IV30™ has spiked today and in fact, the front month (1 day vol) has risen even more. The 52 wk range in IV30™ for HLF is [26.80%, 98.06%], so the current level is still just in the 26th percentile (annual). The thing about the move today is, I can't find any news... Scary...

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



Red represents the weekly options expiring in a day, yellow the Sep28 weeklies and green the Oct monthly options. Ultimately there isn't a lot going on with the skew -- that sharp upward bend to the OTM puts is just a nickel bid in the Sep 45 puts.

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



Across the top we can see the vols are priced to 48.98%, 40.08 and 45.585 for Sep22 weeklies, Sep28 weeklies and Oct monthlies, respectively. Ultimately the vol rise and stock drop caught my attention when I realized that IV30™ was still in (near) the bottom quartile in a name that can gap hard on "almost" news.

This is trade analysis, not a recommendation.

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Skyworks Solutions (SWKS) - Order Flow Pushes Skew; Two Day Bets Are In

SWKS closed at $29.48, up 0.9% with IV30™ up 6.6%. The LIVEVOL® Pro Summary is below.



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Skyworks Solutions, Inc. (Skyworks) offers analog and mixed signal semiconductors. Skyworks offers custom linear products supporting automotive, broadband, cellular infrastructure, energy management, industrial, medical, military and cellular handset applications.

This is an order flow and vol note -- in particular a skew shift. SWKS traded 13,032 contracts on total daily average option volume of just 5,887. Calls traded on a 7.4:1 ratio with the heavy action in Sep 29 and 30 calls. The The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates the existing OI in the Sep 29 and 30 calls. I note in particular the size of the interest in the Sep 30 calls which appears to be long (IMHO). The action today in the Sep 30's also looks long, so this feels like new opening long interest. The existing interest in the Sep 29 calls also looks long to me, but the flow today is a bit ambiguous -- maybe two-sided. In any case, the Sep 30 line looks like that's where the action has been and was today -- and it all looks long to me.



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



The red curve represents Sep, yellow is Oct and green is Nov. We can see how elevated the vol is in Sep. In fact, looking back to the Options Tab (across the top), we can see that Sep vol popped 28.8 vol points,while Oct rose just 3.6 vol points. Not only do we see that vol diff reflected in the skew, we can see the shape of the Sep skew bending up to the OTM calls -- starting with the Sep 30's.

I've included the Skew tab from exactly a week ago, below.



Note how different the skew was back then. Sep vol was below Oct and there wasn't really any upside skew bend to speak of. The action in the last several trading days, today most notably, has changed the term structure and the skew shape.

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 a rather lazy chart -- not too volatile. On the vol side we can see the slight move today in the implied and it is now trading above both the short-term and long-term historical realized vols.

Ultimately, this isn't even an IV30™ story -- it's about the Sep options, order flow and skew. The bets are in that something to the upside is coming inthe very near-term. Just to add one last bit of info, the stock volume today was below the daily average -- so the high option volume was not all hedged with stock.

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This is trade analysis, not a recommendation.


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Blue Nile (NILE) - Stock Whips, Vol Pops, But is it High Enough?

NILE is trading $37.83, down 6.1% with IV30™ up 10.2%. The LIVEVOL® Pro Summary is below.



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Blue Nile, Inc. (Blue Nile) is a online retailer of diamonds and fine jewelry. The Company derives its revenues from its three websites: www.bluenile.com, www.bluenile.ca and www.bluenile.co.uk. Its Website serves the United States and 16 additional countries and territories globally.

This is a vol note with an interesting stock and vol trend developing. I found this stock using a custom scan searching for names where IV30™ is up at least 10% on the day. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.



The NILE 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 pop off of earnings on 8-3-2012 (report was released 8-2-2012 AMC). The stock rose from $23.75 to $32 or nearly 35% in a day. From that day forward until 9-13-2012, the stock continued to rise, hitting a six month closing high of $42.50. In English, after popping 35% off of earnings, the stock rose another ~33% in the following six weeks. But then... it stopped.

Since 9-13-2012 the stock is down nearly $5 (~11%), including the drop today. I'm not a chartist, but that stock graph looks ominous. The 52 wk range in stock price is [$22.94, $50.00].

On the vol side, we can see how elevated the implied got into the last earnings release, and how even that 120%+ level wasn't high enough given the move. What's interesting is how low the implied has gotten after earnings. The vol crush was a must, but given he recent stock move up and then more recently, down, the level of IV30™ is noteworthy. Even after the pop today, IV30™ is in the 13th percentile (annual). The 52 wk range is [39.22%, 120.71%]. Hmmm....

Let's look to the Skew Tab snap (below) to examine the vols by strike by month.



The red curve represents Sep, the yellow is Oct and the green curve represents Nov. The next earnings release for NILE should be well within the Nov expiry. It's that vol event that has the Nov options elevated to Oct. I also note how consistent the skew shape is across the front three expiries and how elevated the front is to Oct.

Finally, let's look to the Options Tab.



Across the top we can see the vols are priced to 58.81%, 50.91% and 64.68%, respectively for Sep, Oct and Nov. It's an in interesting to question to ponder if that Oct vol at ~51% really makes sense given the recent stock moves -- including the move today. Just sayin'...

This is trade analysis, not a recommendation.

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