Tuesday, July 5, 2011

Cemex S.A.B. (CX) - Elevated Vol to Earnings

CX is trading $8.45, down 2.4% with IV30™ up 7.7% as of ~11:15am EST. The LIVEVOL® Pro Summary is below.


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CEMEX, S.A.B. de C.V. (CEMEX) is a global cement manufacturer with operations in North America, Europe, South America, Central America, the Caribbean, Africa, the Middle East and Asia. CEMEX, S.A.B. de C.V. was founded in 1906 and is based in Garza Garcia, Mexico.

The stock just came up on the real-time custom scan that searches for calendar spreads between the front two months. I’ve used this one several times for OP – let’s try it again.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

The goal with this scan is to identify back months that are cheaper than the front by at least 8 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 look to the Skew Tab (below) to examine the month-to-month and line-by-line vol shape.

We can see how the front month is elevated to the back – the red dot is the ATM vol in Jul. I checked the CX investor relations website and they have posted on their calendar that the next earnings release is 7-22-2011. That means earnings are in the Aug options cycle, not Jul, yet Jul is elevated to Aug.

Now we can 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).

What I'm interested in here is the vol portion. IV30™ is up today and has now crossed higher than the short-term historical vol (HV20) and the long-term historical vol (HV180). Specifically:

IV30™: 35.52
HV20: 32.67
HV180: 33.95

For the last four earnings cycles, the front month ATM straddle vol was ~50, ~46, ~42 and ~36, respectively. Finally, let's look to the Options Tab (below).

Aug ATM is priced at ~36 vol and Jul is priced at ~42 vol. I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis on this one but it's an interesting vol phenomenon, especially given the recent headlines out of Mexico.

This is trade analysis, not a recommendation.

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