Thursday, August 18, 2011

Con-Way (CNW) - New Lows on Exploding Vol and Order Flow

CNW is trading $23.76, down 7.5% with IV30™ up 23.6%. The LIVEVOL® Pro Summary is below.


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Con-way Inc. (Con-way) provides transportation, logistics and supply-chain management services for a wide range of manufacturing, industrial and retail customers.

The stock showed up on the high volume scan and the rising vol scan. Let's focus on both, but start with the vol. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.

The CNW 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).

IV30™: 63.70
HV20: 74.26
HV180: 37.80
HV10: 103.09

Keep in mind the HV measures are close-to-close, so they do not include the move today, which will certainly elevate those numbers tomorrow. Looking to the chart, we can see the stock has been dipping hard. There was an earnings miss earlier this month and then the overall market downturn has certainly helped push this name lower on already "bad" news. Like a lot of companies of late, even though the implied has been exploding, it's still priced below the recent realized movement of the stock. In other words, that elevated vol was actually a purchase. Well there you go...

Let's turn to some order flow, today. The company has traded nearly 13,00 contracts on a daily average volume of just 604. Puts have traded on a 4.9:1 ratio to calls with the action in the Sep 20 and 25 puts. I actually believe both sides of those were purchases. The Stats and Day's Biggest Trades snaps are included below.

Turning to the Options Tab (below), we can see that both sides of that trade (both lines) are opening (compare trade volume to OI). The bets are rolling in for Sep, and they're opening long vol and likely short deltas.

The Skew Tab snap (below) illustrates the vols by strike by month.

I've highlighted the two strikes in Sep that have been trading. There is a noticeable increase in vol to those Sep 20 puts, but in general, the skew looks "normal(ish)." We can also note the elevated Sep to Dec vol, though Dec will have an earnings cycle, and Sep probably will not.

Possible Trades to Analyze
More holistic here, note the elevated vols that are below the realized returns. If the market really really goes into panic, the implied can return above the HV measures. In English, the market is down a lot, but panic is not here... yet...

The 52 wk range for CNW stock is [$23.93, 42.20]... i.e. it's hitting a new low right now, so those downside bets, especially to the 20 strike, are looking for even lower lows... If that happens, vol will rise more, I'm guessing. The 52 wk range in IV30™ is [27.75, 68.34]. A breach of 70 vol is quite possible if CNW dips another $2 soon.

This is trade analysis, not a recommendation.

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