Thursday, May 5, 2011

Silicon Graphics International (SGI) - Skew Bends on Earnings Pop

SGI is trading $20.61, up 0.6% with IV30™ down 3.0%. The LIVEVOL® Pro Summary is below.


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Silicon Graphics International Corp., formerly Rackable Systems Inc., is a provider of clustered computing and storage, high-performance compute and storage, and data center technologies integrated with a choice of software, customer support services and professional services.

I posted a trade on, so no specific trade analysis on this one. But, this is a skew play -- worth a quick read, IMO.

The company released earnings 5-3-2011 AMC and popped on that news 5-4-2011 more than $4 or over 20%. Here’s a quick news snippet from The Motley Fool:
Revenue jumped 33% from last year to $143.7 million easily passing estimates of $135.6 million. Earnings per share also beat estimates although the company still reported a loss of $0.05 per share.

... Silicon Graphics is on a roll after reporting a blowout earnings report in February and another one in the first quarter. Management expects the company to grow at twice the industry growth rate during 2011,

The stock is up again today. The upside skew has now tilted up (the OTM calls are bid) as the good news gets digested and the option market reflects greater upside risk than down. Let’s turn to the Skew Chart.

There’s a noticeable vol difference between the May and Jun upside. Specifically, the May OTM calls are trading at higher vol than the ATM, unlike Jun which shows a flat(ish) skew.

Let’s 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).

The HV20 is artificially elevated due to the massive earnings move. The IV30™ is now below both the short-term historical vol (HV20) and the long-term trend (HV180). Finally, let’s look to the Options Tab.

This is trade analysis, not a recommendation.

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1 comment:

  1. Wonderful visualization of graphics. This perfection was visualized in our electronics laboratory in our engineering college. My college memories get refreshed with this post.