Monday, December 27, 2010

H&R Block (HRB) - Credit Watch and Law Changes Pop Vol

HRB is trading $11.80, down 7.0% with IV30™ up 18.5%. The LIVEVOL™ Pro Summary is below.

I wrote about this stock for TheStreet today, so I can't discuss trades, but in a slow market, this is actually a pretty interesting read. Start with the news:

NEW YORK -- Standard & Poor's affirmed its ratings on tax preparer H&R Block Inc. on Wednesday but said its outlook on the company is "negative."
S&P also removed Block's ratings from CreditWatch Negative. The ratings had been placed there in October, after the company said it was taking legal action to force HSBC's U.S. finance arm to offer refund anticipation loans for the 2011 tax season.

The company's "BBB/A-2" counterparty credit rating falls into S&P's investment-grade category.

S&P said it removed the company from CreditWatch after Block said that it is still in negotiations and litigation with HSBC. S&P said it believes that being able to offer refund anticipation loans will help Block attract and retain tax-preparation clients and that if it can't offer them, its revenue will suffer. Block's management has described the potential impact as "significant."
Source: AP

12-27-2010 (today):
Tax prep company H&R Block announced on Friday that it had lost a contract with HSBC after a federal regulator told HSBC to stop offering refund anticipation loans. The Office of the Comptroller of the Currency prohibited HSBC (HBC) from offering the loans, which forced the bank to end its long-term contract providing loans to H&R Block (HRB) customers, H&R Block said in its release.

Yikes! Let's look to 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).

We can see the stock drops and vol pops on this related news. I've included the Options Tab below.

Interesting how the stock hasn't moved down quite as much as it might have seemed it would... It was in the mid $10's in Oct. Hmm...

This is trade analysis, not a recommendation.

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1 comment:

  1. it looks like the market is shaking off the uncertainty of not know what will be with HSBC but now it looks like there happy to be free