Monday, January 25, 2010

Apple (AAPL) - Earnings Vol and Skew

AAPL is trading 202.07. The LIVEVOL™ Pro Summary is below. Note the IV30™ drop today and that earnings are today AMC.

The Charts Tab snapshots are included below from Friday (6 mos) and then for today (6 mos) respectively. Click any of the images to enlarge.

For the chart from Friday you can see the exploding IV30™ (red line) relative to the HV30™ (blue line). Also note the IV30™ increase last earnings and the subsequent fall with a gap up in stock price.

The chart from today adds one more data point (today). Note the sell off in vol before earnings.

IV tends upward into earnings as that one specific day has greater vol than others. IV has a tendency to rise as the market falls as well - so AAPL vol was exploding on two phenomenon - (1) earnings and (2) market drop. You can see the level of IV30™ even after the vol drop today is well above anything over the last 6 months (including another earnings cycle). It seems the vol increase may have been over bought, as AAPL vol is lowering pre-earnings.

Finally, you can see that AAPL has a pronounced reverse skew - the calls are bid as high as the puts. For a thorough discussion of "normal" skew shape please read this post: HERE.

The 3D skew chart (animated) is included below (this is a rough copy - the real movie is smoother). This Skew chart is coming to Livevol™ Pro soon and is patent pending.

******************* CLICK THIS IMAGE TO ANIMATE IT

Note the highest strike calls and how high the vol is relative to the other months.
Skew legend:
Red - Front Month
Yellow - Second Month
Green - Third Month
Light Blue - Fourth Month
Dark Blue - Fifth Month
Purple - Sixth Month

This means Feb calls are expensive relative to March.

You can also check out the vol levels last earnings date (pre-earnings - 10/19/2009). Click the image to enlarge.

Then see how the vols looked the day after earnings. Click the image to enlarge.

And finally, how the vol looks today. Click the image to enlarge.

Note the vol crush from pre to after earnings in the front month (red) which is as expected. Note also the higher level of vol this time (dual phenomenon discussion above). The vol crush could be substantial in this cycle - of course, the higher vol implies greater potential for stock movement.

Legal Stuff:

No comments:

Post a Comment