Tuesday, May 31, 2011

Bridgepoint Education (BPI) - Month-to-month Vol Difference Opens

BPI is trading $22.78, up 1.6% with IV30™ up 0.9%. The LIVEVOL® Pro Summary is below.


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Bridgepoint Education, Inc. (Bridgepoint) is a accredited provider of postsecondary education services. The Company offers associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences.

I wrote about this stock for TheStreet.com -- the OptionsProfits service, so no specific trade analysis. Having said that, this is a worthy vol one to check out.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price >= $5
Sigma1 - Sigma2 >= 8
Average Option Volume >= 1,000
Industry != Bio-tech
Days After Earnings >=5 <=70
Sigma1, Sigma2 >= 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.

The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. 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 front month vol simply because earnings are approaching.

Looking to the Skew Tab (below).

We can see the vol is elevated from Jul to Jun. Noticeably the vol diff between the ATM puts (22.5 strike) is substantially lower than the vol diff between the OTM puts (20 strike).

Now we can turn to the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

A few things to note:
On the stock side, we can see BPI has gapped a couple of times of late – on an earnings release and most recently on an analyst upgrade. On the vol side we can see the IV30™ has been rising as the stock ha gapped – but the HV20 is actually higher than the implied.

IV30™: 59.03
HV20™: 64.90
HV180™: 48.83

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

This is trade analysis, not a recommendation.

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