Tuesday, May 10, 2011

EBIX - Earnings Out, Vol Still Up, Skew Examination

EBIX is trading $20.11, down 7.9% with IV30™ up 9.2%. The LIVEVOL® Pro Summary is below.


Click for Free Trial


Ebix, Inc. (Ebix) is an international supplier of software and e-commerce solutions to the insurance industry. Ebix provides a series of application software products for the insurance industry ranging from carrier systems, agency systems and exchanges to custom software development for all entities involved in the insurance and financial industries.

This is a really interesting one. The company released earnings this morning (though the time of announcement was unknown until they released the news). They reported their numbers, here's a quick snippet:

Ebix delivered the following results for its first quarter of fiscal year 2011:

Revenue: Total Q1 2011 revenue grew to a record $40.1 million, an increase of 27% on a year-over-year basis, as compared to Q1 2010 revenue of $31.6 million. The Q1 2011 results include financial results from the ADAM acquisition, as of 7th February 2011.

Expenses: Ebix’s operating expenses for the quarter grew by 30 percent to $24.4 million...

Source: Ebix Q1 Revenue Rose 27% to a Record $40.1M, Net Income Increased 24% to $15.2M and EPS Rose 16% to $0.37

So earnings are out (I think)... But vol is up today. The company has traded over 7,700 contracts contracts on total daily average option volume of just 2,635. Puts have traded on a 4.6:1 ratio to calls. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates the action. The most active puts are the front month 20, 21, 22 and 19 strikes, respectively.

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

With the vol is up (still), we can actually see that the front month and back month have a pretty large vol difference. Hmm...

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 how elevated the IV30™ is relative to the HV20 (short-term realized vol) and the HV180 (long-term realized vol). Odd for a company that apparently just released earnings. Apparently there is more news to come as the option markets reflect elevated risk (read: vol).

Possible Trades to Analyze
Do some research here to understand why vol is up. After that, here are some interesting trades to examine given what you find.

1. Calendar Spread May/Jun:
The May/Jun 22 call spread looks like a 10 vol point difference. There are a bunch of other possibilities, even diagonals.

2. Skew spread in Jun:
For the bullish, a Jun 23/24 call spread looks like the high strike is priced at higher vol than the lower strike -- maybe worth some analysis.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:

No comments:

Post a Comment