Yahoo! (YHOO) - Elevated Vol, OTM Call Skew Bid, Vol Inflection Point?

YHOO is trading $16.12, down 0.9% with IV30™ down 2.2%. The LIVEVOL® Pro Summary is below.



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Yahoo! Inc. (Yahoo!) is a digital media company. Yahoo! provides engaging and canvases for advertisers to connect with their target audiences. To users, it provides online properties and services.

This is a vol note on a stock with seemingly perpetual takeover rumors. Let's start with the Charts Tab (one year), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



On the stock side, while the price has been on a roller coaster, it's essentially unched for the year. The vol portion reveals the story. We can see the implied is trading well above the two historical vol measures. Specifically:

IV30™: 53.75
HV20: 39.94
HV180: 43.36

I've drawn in a horizontal line to help illustrate the level of the implied to its own past (not the historical realized vol, the historical implied vol).

The peak for the year reflects a sensitivity to the overall market -- that was the icky time for the market when ppl were willing to see the Euro-Zone problems (now we're more ostrich like... eh hem). The implied is at an interesting level as it's (sort of) at an inflection point. Either it spikes again to some news, or it falls back to the historical implied levels over the last year. That's all a guess, just sayin' it looks like ~54 vol is not a "resting point."

Let's turn to the Skew Tab.



In the front, we can see the upside skew is super bid -- takeover skew as I like to call it. This is the norm for YHOO and has been for quite some time as it moves in and out of bid OTM calls.

I've included the skew chart for today, again, but this time without the Nov options.



Once the axis are re-scaled we can see that what at first appeared to be a flattish skew in Dec is in fact also bid to the upside. This re-scaled skew also illustrates the vol diff between Dec and Jan. I believe the next earnings cycle for YHOO is after the Jan expo.

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



Possible Trades to Analyze
Vol sales are interesting to analyze as are potential calendars -- maybe Jan against Nov and Dec, maybe even on ratios in both. If the upside is the risk in YHOO for a gap up (that's an "if"), then the downside may be less scary for ratios on the short side. Ya know, or not...

This is trade analysis, not a recommendation.

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Level 3 Communications (LVLT) - Calendar Spread, Depressed Vol and Gamma Priced to Sell Against Vega

LVLT is trading $21.36, down 1.4% with IV30™ down 8.1%. The LIVEVOL® Pro Summary is below.



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Level 3 Communications, Inc. (Level 3) is engaged in the communications business. Level 3 is a facilities-based provider of a range of integrated communications services. It offers a range of communications services, which include network and Internet services, colocation service, media services and voice services.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months. I figure we're on Friday before expo, this is a cool one to look at.

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.

Let's turn tot he Skew Tab, below.



We can see similar skew shapes across both months with the Nov options above the Dec. I do note that dip in the 23 strike for Dec, but that's just bc of wide markets. In fact, the width of the markets in general, and in Dec in particular, are disturbing in that trades may not be had for reasonable prices.

Now we can turn to the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



What I'm interested in here is the vol portion. Check out how low IV30™ is relative to the short-term historical vol (HV20) and the long-term historical vol (HV180). Specifically:

IV30™: 52.08
HV20: 69.70
HV180: 60.08

Se we've got depressed vol while the gamma in Nov is priced to sell relative to Dec.

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



Potential Trades to Analyze
The calendar is interesting, ratios are interesting, diagonals as well. The real problem here is the width of the markets. This one is less interesting to analyze unless reasonable prices can be had. You would need to do vol calcs on the actual execution prices to really understand and / or realize a vol scalp.


This is trade analysis, not a recommendation.

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Cypress Semiconductor (CY) - Vol Pop, OTM Dec Calls Trading

CY is trading $19.43, up 5.3% with IV30™ up 4.0%. The LIVEVOL® Pro Summary is below.



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Cypress Semiconductor Corporation (Cypress) is a supplier of programmable solutions in systems. In addition to its programmable system-on-chip platform (PSoC) based programmable solutions, including TrueTouch, PowerPSoC, OvationONS, PSoC 3 and PSoC 5, Cypress also offers West Bridge peripheral controllers, Universal Serial Bus (USB) controllers, general-purpose programmable clocks, and a wide portfolio of static random access memories (SRAMs).

That sounds pretty complicated, no?...

Anyway, this is an order flow note, namely OTM Dec calls trading size. The company has traded 11,856 contracts on total daily average option volume of just 3,078 in the first hour and a half. Calls have traded on a 60:1 ratio to puts with the action in the Dec 21 and 22 calls. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that both of the Dec calls are mostly opening (compare OI to trade size). Both lines look like purchases to me, but the existing interest in the Dec 21 calls does look short to me, so I believe OI will actually go down -- i.e. go from 4,353 to zero then up again on the long side.



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



Two phenomena caught my eye. First, the Dec 21 vol is kinked up to the order flow, or in English, the vol has moved up more in that strike than surrounding strikes b/c of the demand for those options (demand up means price up means vol up). Second, the Dec options are priced to higher vol than both the Nov and Jan'12 expirations.

I didn't include the Mar skew in this image (I dunno why, just roll with me), but Mar is priced almost identical to Jan ATM. The next earnings release is actually due out just after the Jan expo. So, Dec elevated vol is not earnings related, best I can tell.

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



We can see that the short-term realized vol of the stock is actually above the implied, so while Dec vol is elevated to the other expos, the stock is still moving with more volatility than is priced in the options.

Possible Trades to Analyze
This feels like a glow off of the CSCO earnings. Having said that, maybe that's appropriate? It feels like a bet on this would be more like in the earnings month, and buying elevated vol into Dec (which has the holiday death to vol shtuff) kinda feels icky. Of course, if the stock is taken over @ $28, then, well... ya know...

This is trade analysis, not a recommendation.

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Apple (AAPL) - Vol Up, Stock Down. Is Apple OK?

AAPL is trading $384.06, down 2.8% with IV30™ up 13.3%. The LIVEVOL® Pro Summary is below.



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

I found AAPL using the custom scan that searches for names where IV30™ is up at least 10% on the day. AAPL is one of just two (KMI is the other). There are still rumors of slipping iPhone 4GS growth / sales. There is also news about the iPad:

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Apple(AAPL), meanwhile, fell 2.4% to $385.70 as a new report said the arrival of Amazon's(AMZN) Kindle Fire could depress sales of the iPad. According to the survey conducted by ChangeWave, 26% of potential Fire buyers may delay the purchase of a new iPad.
Source: TheStreet.com: Electronic Arts, Apple: Tech Winners & Losers, written by Olivia Oran
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Well there you go... iPhone and iPad troubles... maybe...

The custom 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 AAPL 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).



I've highlighted a couple spots. First, on the stock chart in early Oct we can see the stock drop and massive vol gain. That move was essentially market driven -- SPX was falling, VIX was climbing.

The second piece I highlighted is the vol trend as of today (and the last few days). We can see the implied has bounced off of the long-term historical realized vol (HV180) and shot back above the short-term historical realized vol to the mid 30's. It's that vol gain today that has AAPL appearing on the scan. The vols today are:

IV30™: 35.29
HV20: 32.67
HV180: 26.92

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



We can see the ATM vol for all three expirations shown are right on top of each pother, while the wings (OTM calls and puts) and priced to higher vol to the front. Basically, normal...

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



Rather than discuss possible trades, I'll just write this: There seem to be fears that AAPL is in trouble, 'n stuff 'n stuff. Well, they might be, but right now the stock is still well above the low hit in early Oct, the vol is well below the peak of that same time and the skew isn't showing any weird shapes or reflecting any substantive one-sided (read: downside) risk. Basically, for today, AAPL looks fine -- just some icky retail news about competitors.  Having said that, without Mr. Steve Jobs around to combat the competition, maybe this isn't just a one day "thing."  Maybe Apple isn't gonna be ok... Or, maybe it will be "ok," and that's the problem since it used to be "amazing."

This is trade analysis, not a recommendation.

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Forest Oil (FST) - Elevated Vol, Calendar Spread and Skew Kinks

FST is trading $14.74, up 0.4% with IV30™ down 2.5% as of ~11:35am EST. The LIVEVOL® Pro Summary is included below.



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Forest Oil Corporation (Forest) is an independent oil and gas company engaged in the acquisition, exploration, development, and production of oil, natural gas, and natural gas liquids in North America.

The vol in this name caught my attention – both the vol comp of implied to historical, as well as the calendar vol diff. Let’s start with the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



Note how the implied is trading above the two historical measures. That gap up in the HV20 is much a do as it’s simply a reflection of the large $4 (ish) divi that was paid. As of right now the vol comps read:

IV30™: 91.75
HV20: 84.09
HV180: 63.73

Let’s turn to the Skew Tab to examine the next vol phenomenon – the month-to-month vol diff.



We can see the Nov vol lies well above the Dec. Further, we can see some funkiness in the Dec 13 strike relative to the surrounding strikes in that expo cycle and a widening vol diff between the downsides of Nov to Dec relative to the ATM. Tricky…

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



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. I will say that the opportunity to sell vol over 100 seems tasty. The sneaky vol dip in some of the Dec puts may be an opportunity to examine a long pos with some depressed vol (ish) to cover some sort of spread -- either inter/intra/diagonal.

This is trade analysis, not a recommendation.

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Adobe Systems (ADBE) - Stock Down, Vol Up, Future... Uncertain?

ADBE is trading $27.90, down 8.3% with IV30™ up 16.3%. The LIVEVOL® Pro Summary is included below.



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Adobe Systems Incorporated (Adobe) offers a range of business, Web and mobile software and services used by professionals, knowledge workers, developers, marketers, enterprises and consumers for creating, managing, delivering, optimizing and engaging with content and experiences across multiple operating systems, devices and media.

With the market down size it's not hard to find stocks with elevated vols. This is a note on elevated vol but with interesting news to push it further. I found ADBE using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol.

Here's the news driving the ADBE move today:

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Shares of Adobe Systems tumbled Wednesday after the software maker unveiled 750 job cuts as well as a plan to stop development of its Flash player for mobile device browsers.

In a blog posting on Wednesday morning, another major change was outlined: scrapping development of the company’s widely known Flash Player software for mobile browsers. Adobe plans to focus instead on HTML 5, another platform for publishing content on the Web.
Source: MarketWatch: Adobe pulls plug on Flash for mobile browsers, written by Benjamin Pimente.
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Oh... Wait, so what?

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

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

The ADBE 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).



Before today, ADBE was actually performing quite well, up from ~$23 in Oct to over $30. Today... not so good.  On the vol side we can see the spike today -- rather impressive, really. As of right now we can see:

IV30™: 46.50
HV20: 34.29
HV180: 33.99

So the implied is now well elevated to the historical measures.

Let's turn to the Skew Tab, below.



The skew shapes are actually quite normal -- no order flow in one specific line has pushed (or pulled) vol in any direction on a strike (or set of strikes). It is cool to note that the ATM Nov vol is less than the ATM in Dec while the downside in Nov is more expensive than Dec (in terms of vol).

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



Possible Trades to Analyze
So the question is whether or not this news is truly a shift in the future for ADBE. Keep in mind that this company was / is a takeover rumor fav and with the stock down off the recent rise, perhaps those tricky little fakes... er... rumors... may surface again.

The lack of a real calendar vol diff is frustrating, honestly. With Nov expo approaching a short gamma position feels like it should provide more juice to protect than Nov has. Just last month after earnings vol, ADBE has over 50 IV30™. Having said that, a vol purchase feels icky too.

The most interesting positions to examine here may be diagonals on ratios. It's likely that the next earnings release for ADBE will be after the Dec cycle, so Jan'12 options may be in play given that the ATM vol is just 38. Hmmm...

But really... Is this big news?

This is trade analysis, not a recommendation.

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Waste Management (WM) - Elevated Vol, Calendar Spread, Popping Vol and Correlation Divergence

WM is trading $31.28, down 1.2% with IV30™ up 11.1% as of ~10:40am EST. The LIVEVOL® Pro Summary is included below.



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The Company is a provider of waste management services in North America. Its subsidiaries provide collection, transfer, recycling and disposal services. The Company is also a developer, operator and owner of waste-to-energy and landfill gas-to-energy facilities in the United States.

I found WM on three scans today:
(1) Day vol gainers
(2) Elevated vol to historical
(3) Calendar Spread (month 1 to month 2)

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



On the stock side we can see the abrupt move down from ~$35 to as low as $27.75 on 8-9-2011. The gap down started with an earnings miss. Here’s that news:

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Shares of Waste Management Inc. fell 5% Thursday after the company announced its second-quarter earnings and missed analysts expectations. Profit was down to $237 million, or 50 cents a share, compared with $246 million, or 51 cents a year ago. Revenue rose 6% from a year ago to $3.35 billion, however operating expenses climbed 7.2%.
Source: MarketWatch -- Waste Management shares drop after earnings miss, written by Austen Sherman (http://www.marketwatch.com/story/waste-management-shares-drop-after-earnings-miss-2011-07-28?siteid=yhoof2)
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The stock continued its drop after earnings, but that was more of a market correlation phenomenon. I’ve included the 6 month chart of WM (red) vs SPY (yellow).



The first highlighted area is that stock move down for WM – we can see how strongly correlated to SPY it was. The second highlighted area has been the recent stock movement (down). Note with this second part of the chart how WM now diverges from SPY. Or, in English, as SPY has gone up, WM has gone down. Tricky…

Let’s focus now on the vol portion of WM – I’ve included an enlarged image of just the vol for the same six months. Again, the legend is IV30™- red vs HV20 - blue vs HV180 – pink,



The point here is that the implied is elevated to the historical measures. Secondarily note that the IV30™ has been substantially higher – namely during that stock drop period in late Jul and early Aug.

Let’s now turn to the Skew Tab.



The focus here is the vol diff between the Nov and Dec options. I’ve highlighted the downside, but the upside has that same vol diff. So now we can see the three vol phenomena in play that were listed above. This last one being the calendar diff.

Let’s turn to the Options Tab for completeness.



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. I will say that the elevated vol in Nov looks interesting along with a possible cover in Dec. Having said that, strategies which reduce the net premium even further might also be worth examining.

This is trade analysis, not a recommendation.

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Comtech Telecom (CMTL) - Elevated Vol on Takeover Potential

CMTL is trading $33.78, up 2.1% with IV30™ down 1.4%. The LIVEVOL® Pro Summary is included below.



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Comtech Telecommunications Corp. (Comtech) designs, develops, produces and markets products, systems and services for communications solutions.

I wrote about CMTL on 10-6-2011. You can read that post here:
Comtech Telecomm (CMTL) - Vol Explodes 50%, Options Trade 45x Average Volume

The stock was trading $31.08 with IV30™ just above 55.

Today I found this stock using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol.


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

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

The CMTL 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 popped on the day of that first blog post. Here's a reprise of the news:

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Comtech Telecommunications Corp. (CMTL) rallied 7.5 percent to $30.32 after jumping 7.8 percent, the most intraday since Jan. 26. The communications equipment maker is attracting potential takeover interest from several government contractors, according a report by Reuters, which cited people familiar with the situation.
Bloomberg: Comtech, Constellation Brands, Express Scripts, Yahoo: U.S. Equity Movers, written by Lu Wang.
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The stock closed at $30.90 on 10-6-2011 and has continued its upswing to now just below $34, since. On the vol side, we can see that the HV20 has fallen off a cliff as the stock has decided that it likes being over $30. The implied has fallen from the 55 level to 41 (ish), but that level is now well above both of the historical vol measures. Specifically:

We can see:
IV30™: 41.30
HV20: 27.60
HV180: 31.56

Let's turn to the Skew Tab, below.



We can see the Nov options are actually priced below the next two monthly expirations. The next earnings release is likely in the Dec cycle (but after Nov) so that elevated Dec to Nov and Dec to Jan is expected. There is an interesting vol spike in the Jan 37.5 calls relative to the surrounding strikes.

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



Possible Trades to Analyze
Selling Dec feels icky given earnings are due out. Selling the Nov strangle is... I dunno... not that interesting. Doing a calendar to own Dec, maybe ratios or diagonals starts to seem like an interesting position worth examining but gets short the gamma for a couple of weeks.

This is trade analysis, not a recommendation.

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Research in Motion (RIMM) - Stagnant Stock, Elevated Vol, Weekly Vol Diff

RIMM is trading $18.66, down 1.2% with IV30™ up 0.4% as of ~11:30am EST. The LIVEVOL® Pro Summary is below.



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Research In Motion Limited (RIM) is a designer, manufacturer and marketer of wireless solutions for the worldwide mobile communications market.

RIMM has some interesting stuff goin' on with the vol and realized stock movement. Let’s start with the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™- red vs HV20 - blue vs HV180 - pink).



On the stock side, just an awful ride down for shareholders. It’s incredible to think that this was a $70 stock less than a year ago. RIMM is struggling with the possibility of obsolescence. The last two earnings cycles have been ugly, prompting abrupt stock gaps down.

On the vol side, we can see that the implied is elevated to the two historical measures, and with good reason. It is interesting to note that the short-term realized historical vol (HV20) is depressed right now – a reflection that the stock has been stuck in the same spot(ish) for a few weeks.

Let’s turn to the Skew Tab.



I’ve included the weekly options (red) as well as the two monthly expirations (Nov and Dec). We can see the wings in Nov monthlies are priced above Dec, while the Dec ATM options are substantially more expensive (in terms of vol) than the Nov monthlies. It’s likely that RIMM’s next earnings release will be in the Dec expo cycle and thus the elevated vol.

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



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. But, there are some interesting positions worth examining while still avoiding the Dec earnings vol. The weekly options in RIMM are priced to low vol relative to the Nov monthlies as the underlying has stayed relatively still. This is an interesting case where selling the lower vol has some rationale -- an interesting exercise to examine how RIMM does in the next four trading days relative to that weekly options vol.

This is trade analysis, not a recommendation.

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