Thursday, June 2, 2011

Blackboard Inc. (BBBB) - Vol Diff In Takeover Shopping

BBBB is trading $41.99, down small with IV30™ down 1.4% as of ~ 11:10am EST. The LIVEVOL® Pro Summary is below.


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I posted this one to (OptionsProfits), so no specific trade analysis -- here's a quick note.

Blackboard Inc. is a provider of enterprise software applications and related services to the education industry. The Company’s various software applications are delivered in its six product lines: Blackboard Learn, Blackboard Transact, Blackboard Connect, Blackboard Mobile, Blackboard Collaborate, and Blackboard Analytics.

I found this stock in a custom scan that searches for calendar spreads between the second and third months.

Custom Scan Details
Stock Price GTE $5
Sigma2 - Sigma3 GTE 7
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 and LTE 50
Sigma2, Sigma3 GTE 1

The goal with this scan is to identify third months that are cheaper than the second month by at least 7 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.

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).

The most obvious point in the chart is the stock pop on 4-19-2011. Here’s the driving 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.
Source: AP

It’s interesting to note that the stock has steadily headed down since that news and has essentially cut the one day pop gain I half over the last 6 weeks. The stock price the day before the pop was $37.16. Let’s turn to the Skew Tab.

We can see that the Jul vol (58.76) is elevated to Oct (46.99). The greatest vol difference opens up to the Jul 50 calls – which are oddly bid.

Let’s turn to the Options Tab for completeness.

This is trade analysis, not a recommendation.

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