Thursday, February 17, 2011

NutriSystem (NTRI) - Stock and Vol Move on Competitor Results

NTRI is trading $20.83, up 6.6% with IV30™ popping up 27.9%. The LIVEVOL® Pro Summary is below.


For a limited time we are offering a FREE real-time trial to Livevol® Pro for non-professional traders. Click for Free Trial Offer

Nutrisystem, Inc. is a provider of a weight management system based on a low-calorie, portion-controlled, prepared meal program. NTRI is up on the WTW news. You can read about that here:
Weight Watchers (WTW) - Insider Trading?

NTRI has traded over 11,500 contracts on total daily average option volume of just 847. Calls have traded on a 3:1 ratio to puts with the Mar 20 and 21 calls showing the most action. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates the action. Note that the company has earnings in the Mar options cycle. That embedded vol event could cause a big move given what happened with WTW (good or bad news).

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

We can see the Mar vol is well above the Jun vol. It's interesting to note that Jun has two earnings cycles (likely). Or said differently, Jun may have an earnings cycle that Mar does not have.

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 the stock has popped today. It also moved up ~ 10% on the last earnings report.  More interestingly, check out the IV30™. It's been elevated for a while relative to the HV20™ and HV180™. Given that WTW moved 40% on earnings today, a naked vol sale... well, it's probably not a great idea.

Possible Trades to Analyze
1. Buy two earnings cycles vol for less than one:
Calendar spread something in Mar to Jun (owning Jun). The ATM vol difference is ~13 points, or in English, Jun vol is about 13 points less than Mar. One caveat here -- this might be one to do with OTM options -- it doesn't do much good to own the back month (and therefore the vega) if the stock is going to move huge away from the spread strikes.

2. Bet on some good news on earnings:
Just sort of a straight down the middle, plain vanilla (I can't think of anymore cliches) call spread to own deltas for cheap.
Buy the Mar 23/24 call spread for $0.25 or less. I'd be careful to pay anymore for this thing -- it's pretty far OTM.

3. Buy expensive vol:
Yeah, I said it. With WTW moving 40% on earnings and NTRI moving $1.30 in sympathy, the Mar 21 straddle for $2.80 actually doesn't feel that expensive. A little more tricky -- buy the Jun 21 straddle for $4.45. Same argument as above, but own two earnings dates (maybe -- Jun isn't a sure thing).

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:

No comments:

Post a Comment