Thursday, July 7, 2011

Swift Transportation (SWFT) - Stock Moves Higher on "Right" Investors

SWFT is trading $14.19, up 2.1% with IV30™ up 4.2% as of ~ 10:30am EST. The Livevol® Pro Summary is included below.


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Swift Transportation Company (Swift), formerly Swift Holdings Corp., is a transportation services company and a truckload carrier in North America.

I read an interesting article today that claimed a large number of institutions are starting to accumulate the stock and that may be responsible for the climbing price. Here’s a quick snippet of the article:

Since its December 2010 IPO, Swift Transportation (SWFT) went from 13 filers at the end of 2010 to 104 as of the end of Q1 2011. What’s interesting is that a lot of these filers are small cap growth & value hedge funds.
Source: Seeking Alpha, written by Alpha Stratus

Let’s start with 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 stock has been headed straight up of late while the IV30™ has remained elevated to the historical measures (both long- and short-term). The upward momentum in the stock price is met with elevated vol in the calls in the front month relative to the back. Let’s turn to the Skew Tab from Livevol® Pro.

I’ve highlighted the vol diff between the 15 strikes in Jul and Aug. Specifically, the Jul 15 calls are priced at 55.4 vol, while the Aug 15 calls are priced at 39.9.

The last (and only) earnings report for SWFT was 4-26-2011. If we project earnings later than Jul 16th, then the next earnings cycle would be in the Aug options cycle, not Jul. In other words, the depressed vol in Aug relative to Jul includes a volatility event.

Let's turn to the Options Tab, below.

I wrote about this one for (OptionsProfits), so no specific trade analysis, here. I will say that doing a calendar would mean being short the gamma in Jul. With the stock’s momentum and the elevated vol (which does reflect elevated risk), that could be risky.

This is trade analysis, not a recommendation.

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