Thursday, April 14, 2011

Tibco Software (TIBX) - Elevated Vol and Bent Skew

TIBX is trading $28.63, down 0.8% with IV30™ down 4.2%. The LIVEVOL™ Pro Summary is below.


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TIBCO Software Inc. (TIBCO) is an independent provider of middleware and infrastructure software. I can't discuss any specific trades as I posted this pone for, but there is some cool vol and skew stuff happenin' here.

I found the stock using a real-time custom scan. This one hunts for high vols.

Custom Scan Details
Stock Price >= $7 <= $70
IV30™ - HV20™ >= 10
HV180™ - IV30™ <= -8
Average Option Volume >= 1,200
Industry != Bio-tech
Days After Earnings >=10 <=60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20™) and the long term trend in stock movement (HV180™). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated IV30™ simply because earnings are approaching.

The TIBX 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).


We can see:
IV30™: 42.35
HV20™: 27.13
HV180™: 34.71

So, IV30™ is elevated relative to the short-term and long-term realized movement of the stock. Let's turn to the Skew Tab.

Two things I saw here.
1. While May is elevated to Aug, the next earnings cycle is due out either at the end of the Jun cycle, or more likely, the beginning of the Jul cycle. Hypothetically one could purchase depressed Aug and sell May, then sell Jun (after May expo), and own earnings vol against two sales that might actually be higher than Aug. Dunno, just a thought..

2. Extending observation #1 a bit -- we can see that the 31-33 strikes show an even greater vol disparity between months.

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

The May 29 straddle is priced at ~ 41.5 vol.

This is trade analysis, not a recommendation.

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