Wednesday, May 25, 2011

IMAX - Call Buyer Bets to Upside, Earnings Date Ambiguous

IMAX is trading $34.30, up small with IV30™ up 0.6%. The LIVEVOL® Pro Summary is below.


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IMAX Corporation together with its wholly owned subsidiaries, is an entertainment technology companies, specializing in motion picture technologies and presentations... You know, the movies!

This is an odd one in that the company hasn't announced even a range for the next earnings date. The last cycle was 4-28-2011 (I believe), so a projection in the Aug cycle is a starting point... I called IR and other than speaking with a nice lady, didn't get any color on the next date.

The company has traded 10,102 contracts on total daily average option volume of just 1,693. All but 118 contracts have been puts, yielding an 84.6:1 call:put ratio. The action has been in the Sep 40 calls: IMAX Sep 40 calls vs 33.85 stk, cust paid 1.25 for 7241. Color from Mike Bristow of the Vtrader Group. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size). When looking down the entire option chain for IMAX, I don't see any OI larger than 1,500 with the exception of the Jun 35 calls (which looks short), so this trade is quite large for this name.

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

We can see how depressed the Jun vol (red) is relative to the back two months -- so the option market is pricing earnings after the Jun option cycle. I've highlighted the Sep 40 calls -- really not much of a skew reaction, if any. The shape of the back two months, and in particular Jul, is flat as opposed to downward sloping... Hmm...

I've also included the skew chart from the first trading day of May (5-2-2011).

Look how the vol as of that date was in fact a "normally" shaped downward skew.

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).

The IV30™ looks depressed (if only slightly) to the short-term and long-term realized vols. With earnings seemingly due out after Jun, this vol chart looks about right. IV60 is in fact ~42.50 relative to an HV180 of 42.43. In English, the further out vol is almost identical to the long-term historical realized vol. I'd expect Aug vol to start increasing (maybe) once an earnings date is confirmed.

We can also see in the chart how the stock has dipped of late (as has the entire market).

Possible Trades to Analyze
Betting on an earnings date is both fun and risky. I don't see any obvious skew trades that are worth examining so any other vol play would at least in part be just that -- an earnings date bet.

For the record, completely separate from the stock itself, I love IMAX!

This is trade analysis, not a recommendation.

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