Thursday, January 13, 2011

Intuit (INTU) - Earnings Date Trades

INTU is trading $46.74, up 0.3% with IV30™ up 11.3%. The LIVEVOL™ Pro Summary is below.

I found this stock using a custom scan I built searching for names where IV30™ is up at least 10% today. The scan details are below with a snapshot if you want to build it yourself in Livevol Pro.

Custom Scan Details
Stock Price >= 10
Average Option Volume >= 1,200
Days After Earnings >= 5 and <= 60
IV30™ Percent Change >= 10%
IV30™ >= 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 INTU 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).

IV30™: 33.76
HV20™: 16.67
HV180™: 31.22

We can see that IV30™ has risen past the HV180™ (long-term realized) and has been well above the HV20™ (short-term realized). INTU has a little extra something - an earnings date that could fall into one of two options cycles.

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

We can see the months are well separated in terms of vol levels. Jan > Feb > Apr. Some calendars are worth examining. Note that last Feb earnings for INTU was 2-18-2010. Friday of Feb expo this year is 2-18-2011 and the company reports AMC. Since 2-18 is a Friday, that date is highly unlikely as an earnings report for companies reporting after the market.

Another interesting phenomenon: The last two earnings cycles INTU stock has moved $5.83 and -$3.27 respectively. So, the stock can gap on those reports.

Finally, let's look to the Options Tab.

Possible Trades to Analyze
1. Bet on a Feb earnings report and another big stock move.
Buy the Feb 47 straddle for $4.00 (~34 vol).
Sell the Jan 46/47.5 strangle @ $1.45 (~38 vol).
This creates a net debit of $2.55, which is less than the stock move on earnings the last 2 cycles. If INTU behaves and stays in the [$46, $47.5] range in Jan expo a strangle sale in Feb to lessen the straddle debit might be in order as vol increases into earnings.

2. Bet on earnings being after Feb.
Buy the Apr 47 straddle for $5.45 (~29 vol).
Sell the Jan 45/49 strangle @ $0.70 (~37 vol).
If INTU stays inside [$45, $49] on Jan expo, then sell some juice in the Feb options. This should reduce the net debit to less than $2.00.

3. Contrarian. Sell some vol in Feb. This wins if INTU doesn't move a lot on earnings, or if the earnings are actually in Mar. This is trade analysis, not a recommendation.

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