Wednesday, June 29, 2011

Bridgepoint (BPI) - Elevated Vol, Or is it?...

BPI is trading $24.00, up small with IV30™ down 5.3%. The LIVEVOL® Pro Summary is below.


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Bridgepoint Education, Inc. (Bridgepoint) is a accredited provider of postsecondary education services. This has been an interesting industry to follow as demand seems to be increasing while the regulatory framework is in flux.

I found this stock using a real-time custom scan. This one hunts for high vols.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20 LTE 10
HV180 - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). 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 IV30™ simply because earnings are approaching.

The BPI Charts Tab is included (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

We can see:
IV30™: 57.96
HV20: 42.52
HV180: 47.20

So, IV30™ is elevated relative to the short-term and long-term realized movement of the stock. Let’s turn to the Skew Tab to search for any line-by-line discrepancies that we can turn into a trade.

The skew is actually quite pretty – no kinks. The front is depressed to the back b/c BPI has an earnings release in the Aug cycle, so that's "normal."

Let's look to the Options Tab (below).

As we saw in the skew chart, there aren’t any obvious vol sales (or purchases) in the chain in terms line-by-line scalps. I wrote about this one for (OptionsProfits) so no specific trade analysis here but, while the implied is elevated to the historical realized, at the beginning of Jun, IV30™ was as high as 74.46. So this isn't an automatic do.

This is trade analysis, not a recommendation.

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