Air Products & Chemicals (APD) - Stock Hits 5-year High; Volatility Hits Annual High; Earnings Due Out Soon.

APD is trading $96.72, up 0.2% with IV30™ up small. The LIVEVOL® Pro Summary is below.




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Air Products and Chemicals, Inc. has a portfolio of products, services, and solutions that include atmospheric gases, process and specialty gases, performance materials, equipment, and services. It is a supplier of hydrogen and helium and operates in markets, such as semiconductor materials, refinery hydrogen and natural gas liquefaction.

This is both a vol and a stock note as earnings approach. APD has breached an annual high in stock price today as well as an annual high in IV30™ and there is still about two weeks to go before earnings are announced. This is a tricky one b/c having said all that, it's just a 23% vol company... And that has implications...

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 we can see that Y-O-Y the stock is up from $78.61, so ~a 25% rise.  Nice...  Looking more myopically to the current period, we can see that the price level reached today (the intra-day high) has breached an annual high.  Even more notable, this stock level hasn't been realized since 2008 for APD -- so we're looking at a 5-year high (give or take).

Then there's the vol... Let's turn to the one-year IV30™ chart, below.



While we saw a stock price multi-year high i the first chart, we can see more clearly here that the stock has breached an annual high in the implied as well.  Earnings are due out 7-23-213 BMO, but still, we have a week and a half before that date and we already see annual highs in vol coinciding with a -year high in stock price.  Hmm...

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



Across the top we can see Jul vol is priced to 21.66% and Aug vol is priced to 24.08%.  That vol difference is due to the earnings event.  Here's a point worth observing, outside all of these relative comparisons.  This is a 24% (or whatever) vol stock that has now reached a five-year high in price and an annual high in volatility well ahead of earnings.  Does this feel like a 24% vol "moment in time" for the stock?  I dunno... Maybe it does... In any case, it wouldn't surprise me if the IV30™ hit the 27%-30% range even if the stock keeps rising. So here we see a rising stock and rising vol... There is no "normal."

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This is trade analysis, not a recommendation.

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Caesars Entertainment (CZR) - Volatility Nears Annual Low as Stock Rips and Earnings Approach

CZR is trading $15.42, up 9.1% with IV30™ down 6.0%. The LIVEVOL® Pro Summary is below.



Caesars Entertainment Corporation provides casino entertainment services. Its casino entertainment facilities include land-based casinos, riverboat or dockside casinos, managed casinos, combination greyhound racetrack and casino, combination thoroughbred racetrack and casino, and harness racetrack and casino, hotel and convention space, restaurants, and non-gaming entertainment facilities.

This is a vol note, specifically a depressed vol note on a stock that has been ripping of late. Let's start with 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 the Y-O-Y return is very impressive with the stock closing at $10.31 one-year ago, yielding a ~50% return in 12-months.  I also note that this was a $4.50 stock just eight (ish) months ago.

But, if we look more myopically, we can see an interesting trend. CZR closed at $12.25 on 6-24-2014 and now 17 days later the stock is trading at $15.42 or a 26% rise in about two-weeks.

But this is a vol story as well, so let's look at the one-year IV30™ chart in isolation, below.



We can see the ebbs and flows in the vol into and out of earnings -- all normal stuff.  But what caught my eye is the recent dip in the implied as the stock has been moving abruptly higher.  The current level of the IV30™ is right at an annual low.  Interesting...

The firm does have earnings due out in the Aug expiry, so there is a vol diff month-to-month and since IV30™ is a blended / weighted average, it does reflect a part of that upcoming earnings event.  That makes the low vol even more odd.

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



Across the top we can see the monthly vols are priced to 57.36% for Jul and 64.04% for Aug.  The 52 wk range in IV30™ for CZR is [61.27%, 121.59%], so even looking at Aug vol -- that seems kinda low for a stock that has moved so much recently and has an earnings release.  Right?  Ya know.. or not... In any case, that Aug (and IV30™) number will rise as we approach that earnings date unless there is some pre-earnings guidance or other unexpected disclosure.

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.

VXEEM, VIX - Complete Reversal and Paradigm Shift -- US vs Emerging Markets via Option Markets

VXEEM spot is quoting $26.56%, down small 7.7% on the day. The LIVEVOL® Pro Summary is below.



VXEEM is the CBOE EMERGING MARKETS ETF VOLATILITY Index. In English, it's the VIX of of the Emerging Markets. An incredible reversal and spot difference has opened up between the VXEEM and VIX that was brought to my attention by Doris Frankel of Reuters. I did some digging and there is some funky goin' on here. Let's take a look together.

First, let's start with the one-year VXEEM and VIX spot chart, below.  The red line is the VXEEM and the yellow line is the VIX.



This graph has two parts.
(1) Checkout the difference in the spot moves between VIX and VXEEM from one-year ago (7-9-2012) to 12-28-2012.
We can see in that time-frame the VIX climbed 26% while the VXEEM dropped 16%.  That's a 42 percentage point difference in the two measures with the option market reflecting substantially elevated risk in the S&P 500 (the VIX) while substantially reduced risk in the emerging markets (VXEEM).

(2) Yesterday that one-year change shows the VIX down 18% with VXEEM up 5%, so a 23 percentage point difference in the totally opposite direction.  Said differently, since 12-28-2012 to 7-8-2013, the VIX has dropped 35% and the VXEEM has risen 25%.  An incredible 60 percentage point reversal.

So, as of right now, the option market reflects a substantial change in the paradigm between the US markets (S&P 500) and the emerging markets.  The next question is, "well, has there been a paradigm shift?  Have the emerging markets realized greater volatility than the US in that time frame?"  The answer is... sort of...

Check out the one-year HV180™ charts for the VIX and VXEEM, below. The yellow line is the VIX HV180™ and the purple line is the VXEEM HV180™.



Quick Note: HV180™ is the historical (aka realized) movement in the spot price over the last 180 trading days -- or about nine-months.

The VIX (yellow line) shows much higher realized volatility than the VXEEM -- which is a little weird given that the VXEEM currently sits at 26.56% and the VIX sits at 14.41%.  Then we see an abrupt rise in the VIX HV180™ (the yellow line goes up quickly) around April of this year while the VXEEM HV180™ (purple line) kind of sits still.

Most recently, the VXEEM HV180™ has popped while the VIX HV180™ has not.  Perhaps the recent move in VXEEM realized volatility has created this paradigm shift -- i.e. making the merging markets look more risky than the S&P 500 on a relative annual comparison... But still, there's no doubting it -- the purple line is lower than the yellow line.  Or, in option speak, the realized volatility of the VXEEM is lower than the realized volatility of the VIX.

So what?... Well, why are the spots showing such an abrupt reversal?  What's going on in the emerging markets that is so different now?

For the record, VXEEM covers:
BRAZIL
CHILE
CHINA
COLOMBIA
CZECH REPUBLIC
EGYPT
HUNGARY
INDIA
INDONESIA
KOREA
MALAYSIA
MEXICO
MOROCCO
PERU
PHILIPPINES
POLAND
RUSSIA
SOUTH AFRICA
TAIWAN
THAILAND
TURKEY

Per the MSCI website.

Keep an eye on this relationship -- for you vol traders (or portfolio diversifiers by region), a reversal of this magnitude is worth noting.

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 Breaches Annual Low in Stock Price; New Annual High in Volatility… But Skew Hints at Recovery

OKE is trading $40.99, up 2.5% with IV30™ exploding up 19.8%. 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. As of December 31, 2012, the Company was the sole general partner and own 43.4 % of ONEOK Partners, L.P. ONEOK Partners is engaged in the gathering, processing, storage and transportation of natural gas in the United States.

This is another elevated vol note on an energy company as the stock is plummeting. I found this stock using a real-time custom scan. This one hunts for elevated vols.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200

The one-year OKE Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



On the stock side we can see the nice climb from one-year ago to the end of Apr. Since then, however, the stock performance has been poor, dropping from $52.09 (4-24-2013) to now $40.91 in two and a half months. Note that large gap down off of earnings on 5-1-2013.

Let’s turn to the one-year IV30™ chart in isolation, below.



As the stock has hit a new annual low just months after reaching an annual high, the implied has been ripping up. On 5-23-2013 the IV30™ was 20.08%. Now, just six weeks later the implied is at 37.20% (it has risen as I am writing the blog) or an 85% rise. The level reached today on this spike up is an annual high. So, as discussed prior, we are looking at a stock that has both breached an annual low in stock price today and an annual high in IV30™.

The Skew Tab also reveals some interesting volatility phenomena.



Two things pop out in this picture:
(1) Both of the front months show an upside skew. In English, the option market reflects greater upside risk than downside risk in the next two option expiries. This would be considered “backwards” skew.

(2) Note the volatility difference between Jul and Aug to the upside. A substantial vol diff exists between the two months to the OTM calls while the ATM options are in fact priced higher in Aug than Jul. Interesting…

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



Across the top we can see the monthly vols are priced to 34.49% for Jul and 37.84% for Aug. So, Aug ATM vols are higher than Jul, but Jul OTM calls are priced higher than Aug (with respect to volatility). The option market reflects a rather abrupt risk in the near-term to the upside for OKE – even as the stock hits a new annual low.

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.

AngloGold (AU) - Stock hits Annual Low as Volatility Hits Multi-year High

AU is trading $12.55, down 9.39% with IV30™ spiking up 11.7%. The LIVEVOL® Pro Summary is below.



AngloGold Ashanti Limited (AngloGold Ashanti) is a gold mining company with a portfolio of assets and differing orebody types in key gold producing regions. The Company also produces silver, uranium oxide and sulfuric acid as by-products.

I found this stock using a real-time custom scan. This one hunts for elevated vols. What we will also see in this name is a stock price that has now breached annual low.


Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200

The one-year AU 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, well, it’s been pretty bad. One year ago this was a $34.21 stock, and today we see it’s sub-teenager. Not good…

While the stock has been plummeting, the vol of late has been exploding. Let’s turn to a two-year IV30™ chart, below.



We can see the recent rise in the implied has pushed the vol well into multi-year high territory. Over just the last three weeks the IV30™ is up ~50%. Yikes… During the last three months (ish) the stock is down from over $20 – so down ~40%.

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



Across the top we can see the monthly vols are priced to 58.52% for Jul and 56.60% for Aug. There is a monotonic decrease in vol from the front to the back expiries, reflecting greater risk in the near-term than the medium- to long-term. While this is certainly in part a phenomenon surrounding the commodity price of gold, there is some firm specific risk here… that exploding vol is worth noting.

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.

Athenahealth (ATHN) - Volatility Gaps Up; More to Come as Earnings Approach

ATHN closed Monday at $85.02, up 0.34% with IV30™ spiking up 23.4%. The LIVEVOL® Pro Summary is below.



athenahealth, Inc. (athenahealth), is a business services company, which provides ongoing billing, clinical-related, and other related services to its customers. The Company provides these services with the use of athenaNet, an Internet-based practice management application.

I found this stock using a real-time custom scan. This one hunts for vol gainers 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

The six-month ATHN 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 a fairly abrupt rise in price from the start of the year through the middle of March from ~$75 to ~$98. During that same time period, we can see the implied dipping (the bottom of the chart – the red line). We’re starting to see the opposite phenomenon now. Check out the recent stock drop in ATHN and the vol pop today.

Let’s look more myopically at the IV30™ in an isolated six-month chart, below.



On 5-22-2013 the IV30™ closed at 28.88%, today it closed at 47.38% or a 64% rise in just over a month. The company has earnings due out on 7-18-2013 (AMC), so the implied vol should continue to rise. The 52 wk range in IV30™ for ATHN is [24.64%, 54.39%]. At this pace, it’s reasonable to assume that ATHN could break an annual high in IV30™ ahead of the approaching earnings report.

Note than on 5-3-2013 the stock gapped down on guidance / earnings. So, there is precedence here for large stock moves off of the earnings release. The IV30™ going into that release was just 41% -- we can see the impact that stock move has had on the implied as we approach this next earnings date.

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



Across the top we can see that Jul is priced 51.58% and Aug is priced to 41.83%. Again, it would not surprise me to see ATHN breach an annual high in IV30™, perhaps even as high as 60% as 7-18-2013 approaches.

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.

CareFusion (CFN) - Volatility Explodes 140% to Annual High; Acquirer Behaves Like Acquiree

CFN closed Friday at $36.85, down 0.7% with IV30™ up 2.4%. The LIVEVOL® Pro Summary is below.



CareFusion Corporation (CareFusion) is a global medical technology company. The Company operates in two segments: Medical Systems and Procedural Solutions. The Medical Systems segment is organized around its medical equipment businesses.

This is a vol and more myopically, a skew note. Specifically elevated vol (at annual highs) and upside leaning skew. Let's jump right into it 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 an impressive price appreciation with the stock rising from $24.86 one-year ago to now ~50% higher. But the vol is the story here -- and it's really compelling. Let's turn to a one-year IV30™ chart in isolation, below.



Checkout that explosion in vol when the implied rose from 18.01% on 5-22-2013 to now 42.85. That's a 138% rise in a month. The catalyst was a news story that revealed CFN may be in talks to purchase the medical division of the British engineering company Smiths Group (Source: Reuters; Smiths Group confirms approach for medical unit; Reporting by Paul Sandle; editing by Kate Holton

What's interesting is that CFN would be the acquirer yet the skew shape has changed as though the are the acquiree. I've included the Skew tab from 5-16-2013 andthe fom Friday's close (6-28-2013), below

5-16-2013


6-28-2013


Note how the skew on 5-16-213 was downward sloping to the OTM calls (or really, upward sloping to the OTM puts). This would be considered "normal" skew. To learn more about skew, what it is and why it exists, you can read this post:
Understanding Option Skew -- What it is and Why it Exists

Now look to the skew as of Friday's close. The shape as turned parabolic... or said differently, now the OTM calls show elevated risk relative to the ATM options just like the OTM puts. This reflects greater two-tailed risk to shares -- i.e up and down side risk. Hmmm...

Finally, let's turn to the Options Tab.



Across the top we can see that Jul is priced to 44.52% and Aug is priced to 39.34%. In fact, the decrease in vol to further out expiries is monotonic. The option market reflects a new high in annual risk, and it reflects the most risk in this expiration cycle.

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.

Research in Motion (BBRY) - How the Option Market was 'Wrong'; And We Knew It

BBRY is trading $10.75, down 25.8% with IV30™ down 25.4%. The LIVEVOL® Pro Summary is below.



This is the final piece to a there part series on BBRY earnings. It is a beautiful example of how the option market "appears" to have totally mis-priced an earnings event -- one that I was crowing about loud enough that Goldie agreed and sold the idea to their customers a day after we published it.

My first post was on Tuesday 6-25-2013 (see below), then on Wednesday 6-26-2013, Reuters publishde this nice piece:
STOCKS NEWS US-BlackBerry option prices seen too low ahead of results

Read the top story...

Here are the first two articles (click on the titles to read the posts):

6-25-213:Research in Motion (BBRY) - Earnings Approach, But is Vol Too Low? Is Obsolescence Still a Possibility?

6-26-2013: Research in Motion (BBRY) - UPDATE: Earnings Vol Falls Again; What's Going on With BBRY Earnings? Now Goldie Sees it too...

The take aways were simple:
1. The original note surrounded a curiously low vol given the event about to take place on 6-28-2013 BMO (i.e. earnings). See the Symbol Sumary from Wednesday, below:



Note the IV30™ level (78%), then read on...

2. For the prior three earnings releases the IV30™ hit 95.51%, 92.44% and 95.90% respectively for Sep-2012, Dec-2012 and Mar-2013.

3. This is a firm that once dominated its market, now doesn't, was trading dangerously close to penny stock status (in stock price not in market cap) and now we are about to see the future unfold. That is not a low risk event.

4. The Jun28 weekly options priced in a $1.70 move in the ATM straddle

5. The Skew was flat -- which was in fact bullish.

Today, the stock has moved more than 100% greater than that straddle value and the move is down -- a lot.

Bottom line, the option market did reflect too little risk (though this is one outcome of a probabilistic measure so there is no "right" or "wrong.") What is certain is the outcome today -- that the stock moved much more than the options reflected and this was not a surprise... At least not to us...

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.

Arkansas Best (ABFS) - Everything at Once; Vol at Multi-year Highs, Stock at Annual High, Earnings Vol Priced below July Vol

ABFS is trading $19.79, up 2.4% with IV30™ down 1.2%. The LIVEVOL® Pro Summary is below.



Arkansas Best Corporation is a holding company through its subsidiaries is engaged primarily in motor carrier freight transportation. The Company’s principal operations are conducted through its Freight Transportation operating segment, which consists of ABF Freight System, Inc. and other subsidiaries of the Company that are engaged in freight transportation.

I found this stock using a real-time custom scan I built in Fidelity. This one hunts for calendar spreads between the front two monthly expiries. I've included the results of the scan below. But, there’s a second and third part to this story – like a multi-year in IV30™ and earnings that are likely in the back month (meaning the depressed vol month). Now, we have a vol story…

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 > 7
IV30™ GTE 30
Average Option Volume GTE 1,200

Let’s start with the Skew Tab to examine the month-to-month and line-by-line vols.



We can see pretty clearly how the front month (Jul expiry) is elevated to the second month (Aug expiry). It’s this vol difference that triggered the scan. But there is a lot more going on…

Let’s turn to the one-year ABFS 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 that absolutely explosive price appreciation since 5-1-2013, when the stock closed at $9.73. As of today, the stock is up more than 100% in less than two-months and that level is an annual high.

But, there’s more… a lot more… Let’s turn to an isolated two-year IV30™ chart, below.



There are ebbs and flows, but if we look at the far right hand side, we can see that other than the small dip today, the implied is trading at multi-year highs. So we have a stock up 100% in two-months and vol at multi-year highs and a calendar diff opened up between the front two-months… But there’s more yet…

Last year ABFS released earnings on 4-27-2012 and then on 7-31-2012. That means earnings fell in the Aug expiry and outside of Jul. This year ABFS released earnings on 4-30-2013, which would mean there is a likelihood that the next earnings release will be again be outside of Jul expiry but inside Aug.

Putting that altogether means that the elevated vol in Jul to Aug reflects not only multi-year highs in risk in Jul, but risk that supersedes that found in the earnings release. This is a really compelling coincidence of vol and stock price phenomena.

For completeness, the Options tab is included below.



Across the top we can see that Jul is priced to 81.53% and Aug is priced to 74.14%. Now we wait and see – what’s coming in the next four weeks (i.e. Jul expiry). The option market reflects a lot of risk – more so than in the last two-years.

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.

Research in Motion (BBRY) - UPDATE: Earnings Vol Falls Again; What's Going on With BBRY Earnings? Now Goldie Sees it too...

BBRY is trading $14.83, up 1.9% with IV30™ down 6.0%. The LIVEVOL® Pro Summary is below.



This is a follow up post to the article I wrote yesterday. It's all about earnings and earnings vol and what the heck is going on. You can read the prior post (which I do suggest), by clicking on the title below:
Research in Motion (BBRY) - Earnings Approach, But is Vol Too Low? Is Obsolescence Still a Possibility?

Here are the high points (I guess that implies there were low points?)... Anyway...

1. The above note surrounded a curiously low vol given the event about to take place on 6-28-2013 BMO (i.e. earnings).
2. For the prior three earnings releases the IV30™ hit 95.51%, 92.44% and 95.90% respectively for Sep-2012, Dec-2012 and Mar-2013.

As of yesterday, the BBRY Symbol Summary looked like this (below):



Note that the implied had risen 6.1 vol points and seemed about ready to make its climb to the elevated level  of prior earnings releases -- albeit a little slow to the come.  But then, today happened. Check that Symbol Summary at the very top, the implied is now down 5.1 vol points (down to 78.66%).  That puts IV30™ exactly in the 50th percentile -- so, in English, the implied is "average" for the year, but earnings are not an average time --not even close.

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



We can clearly see the prior spikes into earnings (the blue "E" icon represents an earnings release date).  Look at the far right hand side -- that's the dip today. Normally I have pretty good grip on what's going on with vol (or so you would hope), but I have to say, I am confounded by this vol level.  I still believe there is a non-trivial (i.e. non-zero) chance that BBRY goes away in a year (or whatever) -- I mean, BBRY v10 better work.

In any case, this is a firm that once dominated the market, now doesn't, was trading dangerously close to penny stock status (in stock price not in market cap) and now we are about to see the future unfold.  That is not a low risk event.

Also fascinating is the Skew.  Check out the Skew Tab, below.



I've included weeklies and monthlies.  Ultimately, the point is, there is now skew.  Vol is flat -- which is not normal.  The upside is priced the same as the downside which is actually bullish.  To read more about skew, why it exists and what it means, you can go here:
Understanding Option Skew -- What it is and Why it Exists

It turns out goldie (GS) has latched onto this story and put out a note to customers to purchase the weekly straddles into earnings -- they too see this vol as uniquely low.  I saw it first!  Just kidding... Well, no I'm not...

I'm not sure the vol is a purchase, and actually, I couldn't say I was even if I was b/c this isn't advice -- but, I have to say, it has been a while since I have been so confused by what the option market reflects into an earnings release.

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.

Research in Motion (BBRY) - Earnings Approach, But is Vol Too Low? Is Obsolescence Still a Possibility?

BBRY is trading $14.34, up 1.7% with IV30™ up 7.7%. The LIVEVOL® Pro Summary is below.



Research In Motion Limited is a designer, manufacturer, and marketer of wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services, it provides platforms and solutions for seamless access to information, including e-mail, voice, instant messaging, short message service (SMS), Internet and intranet-based applications and browsing.

This is a vol note with earnings approaching -- but it's actually not an elevated vol note, rather, a curiously low vol given the event about to take place on 6-28-2013 BMO (i.e. earnings).

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 we can see that complete reversal and recovery for the firm based on BBRY version 10.  These guys were considered dead in the water -- even I pounded on them on a few occasions when I asked quite literally, if they had become obsolete.  Well, as of this writing the answer would be, no Ophir, they are not.  We can see the stock has risen from an annual low of $6.22 to now well more than 100% higher -- hope springs.

But this is actually a vol note, so let's turn to the one-year IV30™ chart in isolation, below.



First and perhaps most obviously, we can see the abrupt run up in the implied of late as earnings approach with IV30™ rising from 52.93% on 5-24-2013 (so a month ago) to now over 84%.  That's actually pretty normal.  What I find somewhat "abnormal" is the level of the implied right now.  For the prior three earnings releases the IV30™ hit 95.51%, 92.44% and 95.90% respectively for Sep-2012, Dec-2012 and Mar-2013.

If you look back at that isolated IV30™ chart and exclude today -- the implied was in the high 70's.  Now it's popping and my best guess is that it will continue to rise.  The oddity is how long the vol stayed depressed and how quickly it's rising.  Also, as we get further and further into the discovery of how good (or not) BBRY 10 will be, the company's future again is on the line.  If BBRY v10 fails, then we go right back to questions of obsolescence.  It feels like the implied should crack 100% withing a couple days, and if not, then is that vol too low?

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



Across the top we can see Jul vol is priced to 86.82% and Aug is priced to 75.42% (that vol diff is due to earnings).  Let's see how this plays out -- a mid 80% implied could be a bit low, and a super 100% vol could be too high.  There is a non-trivial chance the vol rips up in the next two days. Ya know, 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.

STEC - Pre-takeover Order Flow Yields Two Types: A Good Speculator and a Possible Cheater

STEC is trading $6.71, up 86.9% with IV30™ down 69.2%. The LIVEVOL® Pro Summary is below.



STEC, Inc. (STEC) is a global provider of enterprise-class Flash-based solid-state drives (SSDs) that are designed for systems and applications that require high input and output (IO). The Company designs and develops its own SSD controllers, enhance them with firmware and integrate them with NAND flash media to manufacture SSDs.

This is an order flow note ahead of a takeover. I’m going to show two types of order flow – one that is incredibly suspicious, another that isn’t. Both made huge paper profits on the takeover news today, but it appears in two different ways.

First the news:
---
Western Digital (WDC) has agreed to acquire sTec (STEC) in a cash deal worth approximately $340 million. Under the terms of the deal, each WDC shareholder will receive $6.85 per share. The deal is expected to close by year end 2013.
Source: AP
---

The background to all of this is critical:

(1) The largest shareholder in STEC made a loud and public push for the firm to sell itself about six-months ago.
(2) The average daily volume in STEC is quite low relative to the trades we will be examining. I have included a snippet of the Trade breakdown section below.



Note the total average daily option volume over the last three-months for STEC is 568 options composed of 454 calls a day and 114 puts a day.

Now, the order flow. First, let’s look at what appears to be innocuous trading, with an intelligent but hedged speculation on a takeover.

Trading #1: Purchase of the Aug 4/5 Call spread

On 6-12-2013, it appears that ~1,400 Aug 4/5 call spreads were purchased for ~$0.15 (various prices). Note that combined, that makes ~ 2,800 options in just that trade, or nearly 5-fold the daily average.

That call spread is now worth full value ($1) and is up ~$119,000.

Notes to this trade:
(1) It was a spread, not a naked call purchase. If someone wanted to use inside information they would not have capped the upside – a naked purchase of the Aug 4 calls for ~$0.25 would be a $350,000 gain, or nearly 3-fold the gain on the spread.
(2) The trade date was 6-12-2013 – about two weeks before the announcement.
(3) The expiry chosen was August, giving the position more time but also costing more – again, not the finger print of a fraudulent trade.

Trading #2: Purchases of the Jul 3 calls naked

On 6-21-2013 (i.e. Friday) it appears that ~1,200 Jul 3 calls were purchased naked (uncovered) for ~ $0.60. Those calls are now worth $3.75 for a $380,000 gain.

Notes to this trade:
(1) The trade date is exactly one day before the deal – suspicious.
(2) The trades are in the front month – suspicious.
(3) The trades are naked (no spread) – suspicious.

In my opinion what we have here is one of three things:

(1) Cheaters all the way around (might even be the same people I both trades)
(2) No cheaters all the way around
(3) A cheater in one but not both of the trades

In my opinion, the spreads look either to be normal speculation on a firm known to be a takeover target or a very savvy trader using insider information knowing full well how to hide the obviousness of the trade.

In my opinion the naked Jul 3 call purchases are highly suspicious and could in fact be circumstantial evidence of malfeasance.

Either way, this is a really interesting examination of order flow pre-takeover.

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.

Hillshire Brands (HSH) - Vol Breaches Highs; Risk Elevates... But Why?

HSH is trading $34.22, up 2.0% with IV30™ up 10.69%. The LIVEVOL® Pro Summary is below.



The Hillshire Brands Company (Hillshire Brands), formerly Sara Lee Corporation, is a meat-centric food solutions company. The Company’s portfolio of meat includes Hillshire Farm Deli Select, sausage products and Hillshire Farm Hams.

I found this stock using a real-time custom scan. This one hunts for vol gainers on the day. I've included the results of the scan below.

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 look to 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 we can see a rather impressive and sustained up trend for ~10 months, then a bit of a dip off of that peak in May. But, this is really a vol story, so let's look at the one-year IV30™ chart in isolation.



What I note is the incredibly abrupt rise in the implied after the earnings vol crush.  The vol is up more than 50% from that dip after the last earnings release (blue "E" icon) into new annual high territory. The thing is, I don't know why...

Finally, let's turn to the Options tab, below.



Across the top we can see that Jun vol is priced to 40.63% (which is just two and a half days of option value), Jul is priced to 35.19% and Oct is priced to 32.89%.  There should be an earnings release in between July and Oct expiries.  Ultimately, this is an odd one -- vol rising abruptly, but not b/c of an earnings event.  Hmm...

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.