Visa (V) - Volatility Explodes on Judge's Ruling; $16 Billion in Transaction Fees for Industry at Risk, MA Seems OK

V is trading $181.97, down 4.9% with IV30™ up 55.4%. The LIVEVOL® Pro Summary is below.



Visa Inc. (Visa) is a global payments technology company that connects consumers, businesses, banks and governments in more than 200 countries and territories to fast, secure and reliable electronic payments.

So the news / ruling is out today, and it's a good one for consumers and a bad one for debit card providers. In one of the greatest businesses of all time, debit card providers (read V, MA) basically take money from retailers just b/c they can in baby increments per transaction amounting to $16 billion annually in fees. Yeah, 'B'illion.

Here's the news from a great story in Bloomberg:

---

U.S. District Judge Richard Leon in Washington ruled today that the Fed considered data it wasn’t allowed to use in setting a 21-cent cap on debit-card transaction fees under the Dodd-Frank law. Leon said the rule, in effect since October 2011, would remain in place until the Fed drafts new regulations or interim standards.

“The board has clearly disregarded Congress’s statutory intent by inappropriately inflating all debit-card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit card transaction,” Leon said in his ruling.

The decision, unless overturned on appeal, will force regulators to revisit rules that bankers said would cost them 45 percent of their swipe-fee revenue. Lenders collected about $16 billion annually from those fees before the Fed’s regulation and responded by cutting back on perks such as rewards programs and free checking to soften the blow to their profits.

‘Too Much’

“This is clearly saying 21 cents may be too much,” said Nancy Bush, an analyst at SNL Financial LC, a bank research firm in Charlottesville, Virginia. “You’ll have to go back to the drawing board and figure out how much a debit-card transaction actually costs and is there going to be some kind of premium paid to that.”

Source: Bloomberg News; Fed’s Debit-Card Swipe-Fee Rules Rejected by U.S. Judge, written by Tom Schoenberg.
---

Well there you have it. This reminds me of the credit ratings agency story when the government walked away from settlement talks and announced that they would be seeking 10 figures in retribution for the housing debacle. You can read the article I posted on that by clicking the title below:

McGraw Hill (MHP) - Vol Explodes on News of 10-figure Law Suit; S&P Needs to Burn on This One (and so does Moody's)

If you haven'tread that one, I think it's worth your time...

Interestingly, MA is in the same boat as V, but they just released good earnings this morning.  In the face of the news and the earnings, MA is up nearly $9 as of this writing and the volatility is down.

Anyway, let's get into the options analysis of V today starting with the Charts Tab (two-years) 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 incredibly consistent move up in price. Two years ago this was an $85 stock. Today, even after the drop, it's trading above $180 for more than a 100% return in that time frame. That remarkable up trend and return with equally remarkable low volatility is in great part due to the steadiness of the revenue source (and costs) for V. Transaction fees are easy to predict (until now) and the cost doesn't change that much. It's a beautiful business model, until someone judges it as unfair.

Let's take a look at the one-year IV30™ chart in isolation, below.



We can see that the news today has pushed the implied well into annual high range. In fact, in Mar of this year, the IV30™ hit a low of 14.98%. Whoa... Even now, this is just a 28% vol stock -- not exactly mind blowingly high. That speaks to two things:

(1) The news today is market moving but at this point is not at all catastrophic.
(2) The news today does introduce a new level of uncertainty as reflected by the option market.

Let's look to the Skew Tab, below.



We can see a monotonic vol decrease from the font to the back reflecting less risk in the future than right now. That's interesting considering this news isn't fully digested or complete -- there are more rulings, more pricing, more arguments to be made. I also note the parabolic skew in the front month reflecting both the upside and downside tail risk in the near-term. I dunno... Lower vol in Sep, huh?...

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



Across the top we can see that Aug is priced to 30.71% while Sep is priced all the way back down to 24.09%. Hmmm....

This is trade analysis, not a recommendation.

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Synta Pharma (SNTA) - Stocks Pops, Vol Pops on Cancer News; Implied Vol is Sleepy, Stock Isn't...

SNTA closed Monday trading at $7.15, up 41.3% with IV30™ up 28.8%. The LIVEVOL® Pro Summary is below.



Synta Pharmaceuticals Corp. is a biopharmaceutical company. The Company is focused on discovering, developing, and commercializing small molecule drugs to severe the medical conditions of the patients with cancer and inflammatory diseases.

This is a note on a bio-tech which let out unexpected news and popped b/c of it, while the volatility rose with the equity price.

Let's start with some news from Monday:

---
What: Shares of biotechnology company Synta Pharmaceuticals Corp. soared a whopping 43% today, after results from a mid-stage study of its drug ganetespib in breast cancer patients warranted an expansion of the study.

So what: Synta said that ganetespib helped enough patients with triple-negative breast cancer to support a second stage of the trial, reinforcing optimism over the drug's blockbuster potential of treating different types of cancers. In fact, according to the American Cancer Society, triple-negative breast cancer is particularly fast-spreading and difficult to treat, so the surprising results should help Synta garner some big-pharma partnership support as well.

Source: The Motley Fool via Yahoo! Finance: Why Synta Pharmaceuticals Corp. Shares Skyrocketed, written by Brian Pacampara.
---

So, before we get into finance stuff, let's just take a break and read the news... Forget shareholders, stock prices ad money, let's just hope this drug turns out to be as successful as the initial results point to.

OK... Onto finance stuff again...

This is an incredible vol story. Let's start with the one-year Charts Tab 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 this $0 (zero) revenue bio-tech fell from ~$11 to ~$3.50 in just the span of a few months. With the last gap down (May/Jun of this year) we can see the implied collapsed as well. The risk reflected by the options dropped as the reality of the stock's future seemed destined to be... not a future..

Let's take a closer look at the IV30™ in isolation in the one-year chart below.



It's much easier to see the vol collapse here after the bad news (and stock collapse). More interesting though, is the continued drip-drop of the implied down to right around 60%. I have drawn that yellow horizontal line in the vol chart to indicate how low the volatility reached just before the news on Monday. What's also interesting to note is that with the news today, the stock popped and the implied did too. So, first we had stock collapsing with vol collapsing in coincidence, and now we have the total opposite.

Let's turn to the Options Tab as of the close on Monday.



We can see that the ATM straddle for SNTA in Sep is ~$1.70. The monthly vols by expiry are priced to 91.90%, 84.46% and 90.81% for Aug, Sep and Nov, respectively. Even with the IV30™ pop today, the implied is trading in just the 21st percentile (annual). The vols feels sleepy in this one... the stock, not so much...

UPDATE 7-30-2013: I am now long deltas in SNTA.

This is trade analysis, not a recommendation.

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Apple (AAPL) - Post Earnings Analysis; Risk Paradigm Shift Over; Now the Market Gets It

AAPL is trading $447.59, up 1.5% with IV30™ up 4.8%. The LIVEVOL® Pro Summary is below.



Apple Inc. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.

This is a post earnings note -- a follow up the pre-earnings note. You can read that note by clicking on the title, below:

7-23-2013: Apple (AAPL) - Earnings Preview Reveals Lots of Information; But There is No More 'Old AAPL' -- That's Not Good or Bad... It Just is.

I have also written extensively about AAPL prior to that, and you can read any of those recent posts below by clicking on the titles:

4-18-2013: Apple (AAPL) - This Just Isn't the Company it Used to Be... And it Never Will Be Again.

1-23-2013: AAPL - "Just the Facts Ma'am" -- Well, that Supports the Opinion: "Everything has Changed. The Old AAPL is No More."

12-10-2012: AAPL - Everything has Changed. The Old AAPL is No More. The New AAPL is a Riskier Entity and the Market Doesn't Know What that Means Yet.

12-5-2012: Apple (AAPL) - Have We Moved into a Totally New Volatility Paradigm for This Company? Has Everything Changed?

But let's focus on the last earnings report, and then turn to the option market to complete the picture.

Earnings Results from July 2013
EPS: $7.47 vs. $7.31(est)
Revenue: $35.3B vs. 35B (est)
Gross Margin: 36.9% vs. 36.7% (est)
iPhone Sales: 31.2 million units vs. 26.5 million (est); BUT, average selling price down ~ $32.
iPad Sales: 14.6 million vs. 18 million (est)
New Product Release: ? Coming at end of year?

So those numbers don't really mean anything without some words behind them. First, AAPL's big story for along-time for AAPL was gross margins and they have finally broken below the 40% level (which some think is a 'magical' level). Some of that came from depressed iPhone sales prices even though the number of units sold was higher than expected. But.. it's not what you think. iPhone is losinig market share. Here's a snippet from an in Investors.com article:

---
Apple's (AAPL) share of the global smartphone market shrank in the second quarter as major rivals like Samsung and LG shipped many more units than the iPhone maker.

Market research firm IDC late Thursday reported that worldwide smartphone shipments rose 52.3% over the year-earlier period to 237.9 million units. Apple, however, posted the slowest growth of the top five vendors at 20%. Apple's market share sank to 13.1% from 16.6% a year ago.

Apple remained the No. 2 vendor behind South Korea-based Samsung, which garnered 30.4% market share on unit shipment growth of 43.9%.

Apple smartphone market share at lowest level in 3 years , written by Patrick Seitz.
---

The Tablet market (iPad for AAPL) performed well below expectations. But that's not the big news either (IMHO). The biggest news seems to be that the company again (now for the second year) is saving their "big surprise" product news for the end of the year. Some analysts feel last year's move to do the same was a major mistake and may have cost the firm billions in sales. Well, whatever you think, they're doing it again.

None of this is catastrophic, it's just a reminder that AAPL isn't the same company it used to be.. And btw, at $420 billion in market cap, how could it be?

Let's turn to the two-year Charts Tab 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 incredible run to what is now the famous (infamous?) run to $720 and then the drop to at some points below $400. I've highlighted the most current stock price movement simply to point out that the volatility has sort of dried up -- the stock is in a "quiet period," even with two earnings releases. That's an equilibrium.

Let's turn to the two-year IV30™ chart below in isolation, to examine the volatility.



I've drawn that horizontal orange line to show how depressed the implied is right now. The interesting thing is how he option market reflects future risk for AAPL compared to the realized historical volatility (obviously that would be the past).

HV60™: 22.69%
HV180™: 33.53%
HV360™: 30.79%

We can see that the HV60™ (which covers 60 trading days) is really quite low at ~23% compared to the longer term measures. The longer term measures (HV180™ and HV360™)  incorporate the stock volatility as the market in whole was learning that AAPL had become a different company --that the risk paradigm had shifted and no one knew what that meant.

But today, AAPL is no longer seen as the singular technology innovator of the world. It is no longer seen as a stock driven wildly by a new product releases. It's a $400 billion Goliath, that pays a hefty dividend, has a stock buy-back program and just ain't all that sexy anymore -- at least compared to the old days.

The IV60™ (so the risk reflected by the option market for the next 60 calendar days) is 22.15%, almost identical to the HV60™. Finally, it seems, an equilibrium is forming -- smaller stock price movements (see circled part in the stock chart above) and the similarity of HV60™ and IV60™ -- the past risk and the future implied risk are priced the same.

I said before in Dec 2012 that "Everything has Changed. The Old AAPL is No More. The New AAPL is a Riskier Entity and the Market Doesn't Know What that Means Yet." Well, that's over. The market does get it. AAPL is slower, bigger, and without Steve Jobs.  That's now the equilibrium resting point.. finally.

Anyway, that's my take on it...

This is trade analysis, not a recommendation.

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Facebook (FB) - Stock Rips on Earnings; But Nobody Gets the Volatility... At All...

FB closed Thursday trading at $34.36, up 29.6% with IV30™ down 13.8%. The LIVEVOL® Pro Summary is below.



Facebook, Inc. (Facebook), is engaged in building products to create utility for users, developers, and advertisers. People use Facebook to stay connected with their friends and family, to discover what is going on in the world around them, and to share and express what matters to them to the people they care about.

As I’m sure we all by now, the catalyst was quite simply earnings. FB made a big bet that mobile ads were the next big thing, and in the face of some hefty criticism Mark Zuckerberg was proven right… to the tune of a 30% gap up on earnings. Not only were revenues and profits higher than expected, but cost savings through synergies that bet on the mobile ad world also kicked in. In terms of a management grade, this bet was a screaming A+ so far.

But I want to talk about the volatility, b/c I think there’s something here that is going unnoticed. Let's start with the one-year FB Charts Tab 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 downward spiral the stock realized post IPO, including that nasty gap down after its first earnings release as a public company. But since then there has been a recovery, noted most spectacularly by the earnings move on Thursday.

But let’s look at the vol in isolation. I have included a one-year IV30™ chart below.



We can see the hypnotic ebbs and flows (actually flows and ebbs) into and out of earnings. Note that for each of the last four earnings cycles (which is all of them), that the vol peak was lower monotonically (the blue “E” icons represent earnings dates).

This monotonic vol decrease into earnings is the first vol phenomenon I noticed. FB’s first earnings release was a major unknown post IPO, but since then the firm has not been less risky (IMHO), rather more risky with several questions about the firm’s future and projections. I’ve seen research reports which stated that FB would need 100 billion users to reach the sales figures that justify their P/E (and that’s before this pop on Thursday). Considering there are only 6.6 billion people in the world, I’m guessing FB will not reach 100 billion users (and yes, I know businesses use FB too – don’t be like that).

The news today points to how much we don’t know about FB. That’s not (necessarily) a reflection of opaque financial reporting, it’s simply a reality that no one has ever seen a social media site this big. We have no idea where it’s going. We have no idea if Mark Zuckerberg is right. He doesn’t even know if he’s right (but he was right last quarter, that’s for sure).

The company has a P/E higher than 99% of the S&P 500 – I read that in a Bloomberg News article written by David De Jong in New York. All of this leads to me to simple question, forget earnings vol crushes and stuff, why is the volatility systematically getting lower? I have no idea.
But there’s even more… Let’s turn to the Skew Tab, below.



We can see I have included seven expiries on this chart – weeklies and monthlies. The incredible phenomenon here is that there is a monotonic decrease in vol as we go further out. Or, said differently, the option market continues to reflect lower risk in FB shares in the future. I just don’t get that… And judging from this earnings release, no one else does either.

If you have thoughts on FB and the rip roaring success of earings and the volatility, there is an open thread right now on the Livevol Community. Tell the community what you think.

Livevol Community : Your Voice, Your Ideas. Heard by Thousands. Shared by Millions.

This is trade analysis, not a recommendation.

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

ONEOK (OKE) - Stock Pop Reveals Potential Information Leak Ahead of News; How to Make $3.3 million in 17 Days

OKE is trading $51.58, up 20.4% with IV30™ up 17.7%. The LIVEVOL® Pro Summary is below.



ONEOK, Inc., is a diversified energy company. The Company’s segments include ONEOK Partners, Natural Gas Distribution and Energy Services.

This is an order flow note – or more specifically an order flow not that calls upon some highly unusual trading ahead of what has turned to be market moving news. OKE is ripping on news that it will spin off its gas distribution business. So an event / announcement that was likely discussed internally before today.

Let’s start simple. OKE has averaged 1,747 calls traded a day over the last three months. The Stats tab is included below.



OK. Now let’s look at the Options Tab from 7-8-2013, below.




So the stock price closed at $41.42 (at the top) and check out the volume in the Aug 45 calls: 6,346 calls traded on OI of just 142. The following day that OI went to 5,544. I have included the OI chart for just that option, below.



The OI jumped on 7-9-2013, reflecting the volume on 7-8-2013. That trading turned out to be opening call purchases for ~ $0.50 for ~$275,000 “investment.”

And today…



We can see those Aug 45 calls are now worth ~$6.50 turning that $275,000 bet into a $3.58 million position, or ~ $3.3 million gain (1,100%) in seventeen days.

How fortunate.

This is trade analysis, not a recommendation.

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

GameStop (GME) - Vol Pops. Stock Hits Multi-year Highs, Earnings Approach

GME is trading $43.93, up 3.6% with IV30™ up 11.6%. The LIVEVOL® Pro Summary is below.



I found this stock using a real-time custom scan. This one hunts for vol gainers on the day. But there's a lot more going on here than rising vol on the day.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percent Change GTE 10
Average Option Volume GTE 1,200
IV30™ Change GTE 7

Let's start with the two-year GME 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 that GME is at or near multi-year highs; we're talking four + years. But this is also a vol story, so let's look to the two-year IV30™ chart in isolation.



Before the pop today, we can see that the implied has been trending down almost unabated. Even with the poo today, the implied is trading in the 23rd percentile on an annual basis. Let's add tot he equation that GME has earnings due out near the end of Aug expiry and we see a stock at multi-year highs with depressed vol and earnings approaching.

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



Across the top we can see the monthly vols are priced to 37.95% for Aug and 40.92% for Sep. That vol diff likely points an earnings release just outside of Aug expiry ad in the early portion of Sep expiry -- but that's just a guess. It will be interesting to see if GME continues its upward march in stock price into the earnings announcement and how the vol moves with the stock. Certainly the expectation is substantially higher vol as earnings approach -- perhaps is the first day of many vol pops... Or not...

This is trade analysis, not a recommendation.

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Apple (AAPL) - Earnings Preview Reveals Lots of Information; But There is No More 'Old AAPL' -- That's Not Good or Bad... It Just is.

AAPL closed Monday trading at $426.31, up 0.3% with IV30™ nearly unchanged. The LIVEVOL® Pro Summary is below.



Apple Inc. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.

This is an earnings note, or really, a pre-earnings analysis. I have written extensively about AAPL and you can read any of those recent posts below by clicking on the titles:

4-18-2013: Apple (AAPL) - This Just Isn't the Company it Used to Be... And it Never Will Be Again.


1-23-2013: AAPL - "Just the Facts Ma'am" -- Well, that Supports the Opinion: "Everything has Changed. The Old AAPL is No More."


12-10-2012: AAPL - Everything has Changed. The Old AAPL is No More. The New AAPL is a Riskier Entity and the Market Doesn't Know What that Means Yet.


12-5-2012: Apple (AAPL) - Have We Moved into a Totally New Volatility Paradigm for This Company? Has Everything Changed?

The point of all of the stuff above, although I used a great deal of detail, was simply to say that AAPL is a different company than it once was. The price drop and volatility movement show that -- it is tautological.

Now we look at the stock on the day of its earnings release, and we will see yet again, that AAPL is a different company. It is no longer seen as the technology innovator of the world. It is no longer seen as a stock driven by a new product release. It's a $400 billion Goliath, that pays a hefty dividend and just ain't all that sexy anymore -- at least compared to the old days.

Let's start with the two-year Charts Tab, below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



So, we know the stock story.. It went up a lot, then it went down a lot, then it stopped doing both and has been hangin' near $400 for a while. That quiet period of late is not trivial -- it's actually the meat of the story. But it takes the option market to fill in the rest.

Let's turn to the two-year IV30™ chart in isolation, below.



The blue "E" icons represent earnings dates. I have circled the IV30™ levels for the prior seven earnings cycles and as of the close on Monday. Then I've drawn that horizontal line from the current vol level back in-time so it's easy for us to see how depressed the current vol is all prior seven earnings cycles. In fact, on an annual basis, as of Monday's close, AAPL's IV30™ is in the 38th percentile -- so it's depressed to it's own history over the last year by a fair amount (the 50th percentile would be the median).

So what? It ain't about the iPhone 926 or the iPad 1456 or the iGlases 1 or whatever... This is a stock that pays a 2.8% dividend, has announced a stock buy-back and has and HV30™ of 20.27% and an HV60™ of 22.14%. The HV180™ (which covers 180 trading days or ~9 months) is 33.20%. The stock is less volatile and clearly is using it's cash in ways outside of product development (exclusively). There is no more Steve Jobs, and so there is no more old AAPL. That's not good or bad... It just is.

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



As of Monday's close we can see that the implied move in the options off of earnings is ~$20 or a little under 5%.

This is trade analysis, not a recommendation.

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Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Skechers USA (SKX) - Stock Rips, Earnings Approach, But the Volatility Disappeared

SKX is trading $27.02, up 1.1% with IV30™ down 2.2%. The LIVEVOL® Pro Summary is below.



Skechers U.S.A., Inc. (Skechers) designs and markets Skechers-branded lifestyle footwear for men, women and children, and performance footwear for men and women under several lines. In addition to Skechers-branded lines, the Company also offers a branded junior line.

I found this stock using a real-time custom scan I built. This one hunts for calendar spreads between the front two monthly expiries. But the company has earnings due out on 7-24-2013 (in two days), so of course there is a calendar volatility difference. That’s not the issue… It’s level of the vol – how low it is, that is fascinating.

The two-year SKX 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 sort of a sleepy first year (remember that for later), but recently an explosion from $15.32 (11-14-2013) to now $27. That represents more than a 75% rise in eight months.

But this is a vol story – kind of a weird one… So let’s turn to the two-year IV30™ chart in isolation below.



Keep in mind that SKX has earnings due out in two days, so the vol should be elevated. But, in fact the IV30™ is in the 39th percentile on an annual scale. So, in English, the vol is actually depressed. I have highlighted with the little yellow circles the IV30™ at the time of earnings for the last seven cycles. Then I’ve drawn that horizontal line to represent the current level. We can see pretty clearly how depressed this earnings vol is relative the last seven quarters.

Then recall what we noticed about the stock price. This was actually a “sleepy” stock for a lot of that prior time period and only recently has boomed to a 75% rise. So, the stock is moving abruptly higher as the vol has hit an eight quarter earnings low. Hmmm…

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



Across the top we can see that the monthly vols are price to 46.28% for Aug and 38.80% for Sep. Considering the annual high in IV30™ is 68.06%, that Aug number feels low… right?... Or, ya know, not…

This is trade analysis, not a recommendation.

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Splunk (SPLK) - Stock at All-time High; Volatility at All-time Low

SPLK is trading $50.20, up 0.6% with IV30™ down 5.7%. The LIVEVOL® Pro Summary is below.



Splunk Inc. (Splunk) provides a software platform. Splunk’s software collects and indexes data regardless of format or source, and enables users to search, correlate, analyze, monitor and report on this data, all in real time.

I found this stock using a real-time custom scan. This one hunts for depressed vols.  The interesting note here is that SPLK is actually at an all-time low in IV30™ while the stock is near all-time highs.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 20
IV30™ Percentile LTE 10
Average Option Volume GTE 1,200

The two-year (ish) 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 awesome upward trajectory the price has been on since late last year.  The stock has gone from ~$26 in Nov to now over $50. So we see a nearly 100% return in ~8 months.  We can see that he price is right at an all-time high.

But this is a vol note... So let's look to an IV30™ chart in isolation below over the same time-frame.


While there are ebbs and flows surrounding earnings, ultimately the implied has been drifting lower since the last earnings cycle ad is now at an all-time low.  So, we have a stock at an all-time high in stock price with the vol at an all-time low... Hmm...

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


Across the top we can see the monthly vols are priced to 33.62%, 33.36% and 38.11% for Jul, Aug and Nov, respectively. That Aug vol represents the IV30™ at this point (so close to expiry).

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Tesla (TSLA) - Volatility Divergence Forms; Risk is Elevated for the Next 4 Days

TSLA is trading $112.15, down 11.9% with IV30™ up 6.5%. The LIVEVOL® Pro Summary is below.



Tesla Motors, Inc. (Tesla) designs, develops, manufactures and sells electric vehicles and advanced electric vehicle powertrain components. Tesla owns its sales and service network.

I wrote about TSLA in a three piece series in May. You can read those posts by clicking the titles, below:


5-9-2013: Tesla (TSLA) - Earnings Explosion Spectacle Hides Vol Shift -- This is a New Company -- A Paradigm Shift is Complete

<5-15-2013: b="">Tesla (TSLA) - May Skew Stays Parabolic; Vol Diff Opens... And Some Stuff You May Not Have Known...

5-29-2013: Tesla (TSLA) - This is a New Company; The Paradigm Shift Continues; Part 3 of 3.

Today the stock came up on a real-time custom scan. This one hunts for calendar spreads between the front two months. And yes, I know we are just four days from expiry, bu this is still worth a look...

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

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 back months that are cheaper than the front by at least 8 vol points. 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 front month vol simply because earnings are approaching.

Looking to the Skew Tab (below), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).



We can see two phenomena here:

(1) Jul vol is above Aug vol for all strikes.
(2) The Jul skew shape is parabolic (which is common going into expiration), so the OTM vols show an exponentially greater volatility difference between Jul and Aug.

The earnings date for TSLA is a it ambiguous. Last year they released on May 9 then Jul 25. This year they released on May 8, so Jul 24 is a reasonable guess for the next earnings report. If that's the case, we not only have a calendar vol diff, but one in which earnings vol can be owned for less than the font month (without earnings). Hmmm...

Now we can turn to the one-year Charts Tab (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 TSLA's price has rocketed from an annual low of ~$45, to now trading over $110, even with the large decline today. On the vol side, check out that pop in the implied (the red line). A part of that is due to earnings, but the really abrupt nature of it is in part a reflection of today's pop (~10% as I'm writing the article).

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



Across the top we can see Jul vol is priced to 91.76% while Aug is priced to 82.50%.  But, look at some of the OTM spreads and we'll see much greater than that 9 point (ish) vol diff.

For example:
The Jul/Aug 130 call spread shows a vol diff of ~14 vol points and the Jul/Aug 92.5 put spread shows a ~42 point vol diff.

Please understand that these are just observations not trade ideas or recommendations.

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Leap Wireless (LEAP) - Takeover Comes; Did a Cheater Ride Along? How to Make 7,000% in 3 Minutes

LEAP closed Friday at $7.98, up 2.5% with IV30™ up 1.4%. The LIVEVOL® Pro Summary is below.



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

But then this happened:

---
AT&T said it has an agreement to buy Leap Wireless for $15 per share in cash, or just under $1.2 billion.

Before the announcement, shares of Leap closed at $7.98. They have almost doubled in after-hours trading and are now above the purchase price, indicating investors believe another bidder may emerge.

Source: CNBC via Yahoo! Finance AT&T to Buy Leap Wireless for $15 a Share in Cash
---

I actually used to make a market in LEAP options in 2008 and even back then it was a take-over name. Back then it traded over $50...

Anyway, Doris Frankel called me up from Reuters almost immediately after this news hit the wire and asked about some of the order flow today... In my opinion, there is a substantial chance that insider information was leaked and traded on to garner absurd profits (like 7000% in a day). But it was done like a pro...

Here are the facts:

1. Let's turn to the Stats Tab.



a. The firm averages 1,001 calls traded a day over the last three-months and saw 6,789 options trade on Friday.
b. The call to put ratio was nearly 20:1

2. Some highly unusual options were purchased. The Options Tab is included below.



a. Check out those Jul 9 calls. Those are options that expire in a week and have almost no OI. But on Friday, more than 1,300 traded for an average price of ~ $0.10. How fortunate, with the stock trading at $16 after hours, those $0.10 options are now worth at least $7.00 -- or, 7,000% of their purchase price.

b. The Aug 9 calls see similar action, bought for ~$0.40, but with substantial OI.

The interesting thing here is that option orders (the purchases of the OTM Jul and Aug calls) were pretty small. I've included the Jul 9 call action, just looking at orders greater than 25 lots.



Check out how many orders there were. And the sizes range from 27 to 164 lots -- nothing large and obvious. But, here's the trick... Look at the far left hand side. The timing of the purchases -- they all happened within a three-minute window and just 15 minutes before the close. Coincidence? Well, that would be something.  Feels like someone hiding size by breaking it into smaller trades...

Obviously it's possible this was not improprietous behavior... But it ain't looking good...

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Con-way (CNW) - Stock Breaches Multi-year Highs; Massive Put Spread Bought Ahead of Earnings

CNW is trading $41.71, down 0.4% with IV30™ up 12.7%. The LIVEVOL® Pro Summary is below.



Con-way Inc. and its subsidiaries (Con-way) provides transportation, logistics and supply-chain management services for a range of manufacturing, industrial and retail customers.

This is an order flow note surrounding a company with earnings coming up with a stock price trading at multi-year highs. The company has traded 8,511 contracts on total daily average option volume of just 230. Further, all but 146 contracts traded have been puts, for a nearly 60:1 put:call ratio. The action is almost entirely centered around a purchase of the Aug 40/35 put spread -- and Aug expiry has earnings. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the puts on both sides are mostly opening (compare OI to trade size). When looking down the entire option chain for CNW outside of Jul (which expires today), I don't see any OI larger than 459, so both sides of this trade are very large.  This is pretty clearly an earnings bet (or an earnings hedge).



Finally, the two-year 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 the stock completely fell apart two-years ago, dropping from $40.17 to a low of ~$20.50 in about three months.  Just recently the stock has surpassed those levels (note the yellow horizontal line that I drew in to help see that the levels today are in fact above the levels two-years ago).

The next earnings date for CNW is 7-30-2013 AMC.  So, earnings are due out in less than three weeks, the stock is at multi-year highs, the vol is starting to rise and a huge (huge relative to this firm's OI and average option volume) put spread was just purchased.  Interesting...

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

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Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.