Thursday, May 5, 2011

Blackboard (BBBB) - Takeover, Earnings & Low Vol?...

BBBB is trading $46.43, down 2.4% with IV30™ up 1.4%. The LIVEVOL® Pro Summary is below.


*** Click for Free Trial


This is an interesting one. First, the news:

Education software company Blackboard Inc. said Tuesday that it has retained Barclays Capital as a financial adviser to consult in takeover talks.

The company said it has receiving unsolicited, non-binding proposals to acquire the company but provided no details on the potential buyer or terms of the offers.

Blackboard said it is evaluating the offers as well as strategic alternatives.

Shares of the company rose $11.57, or more than 31 percent, to $48.73 in midday trading. Earlier the stock traded at a 52-week high of $50.10.
Source: AP

Then, on 4-28-2011, Bloomberg came out with this:
Blackboard May Lure Bid as High as $65 a Share, Stifel Says

Blackboard Inc. (BBBB), a maker of online educational courseware, may lure buyout offers of as much as $65 a share from strategic bidders seeking to expand in Internet publishing, analysts at Stifel Nicolas said in a report today.

Source: Bloomberg By Lisa Rapaport.

Let's start with the Charts Tab. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

So the stock pop is pretty obvious -- but I see something else. Look how the IV30™, though it's elevated, isn't really reflective of what appears to be some super high risk. The 52 wk. high in IV30™ is 47.49 and occurred way back in Jun of 2010. Weird...

Let's turn to the Skew Tab, and we'll see yet another odd vol phenomenon.

The front month shows lower vol than the second. Why is that weird? Because BBBB has earnings due out in four calendar days. Obviously the news of the takeover and potential bidding process will have a huge impact on risk (read: vol), but earnings are still a known vol event. Hmm...

Finally, we can turn to the Options Tab.

The ATM straddle is worth ~$3.20, priced at ~39 vol. The Jun ATM straddle is priced at ~44 vol.

Possible Trades to Analyze
This depends on your vol point of view. Feels like 39 could be low -- but then again, it's possible that the earnings announcement won't move the stock since it's all about the takeover (or potential takeover). Being naked short options in this name feels kinda... risky...

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:

No comments:

Post a Comment