Monday, November 14, 2011

Coinstar (CSTR) - Elevated Vol Returns After Earnings

CSTR is trading $45.00, down 2.3% with IV30™ up 3.4%. The LIVEVOL® Pro Summary is below.


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Coinstar, Inc. (Coinstar) is a provider of automated retail solutions. Coinstar’s core offerings in automated retail include its digital video disk (DVD) business, where consumers can rent or purchase movies from self-service kiosks (DVD Services segment), and its Coin business, where consumers can convert their coin to cash or stored value products at coin-counting self-service kiosks (Coin Services segment).

This is a another vol note -- namely elevated implied to both the short-term and long-term historical measures. Let's look to the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

The stock recently gapped down off of earnings as the IV30™ fell from ~73 to ~46 or 37%. In the last two trading days the vol has popped ~20% to now over 57. With that vol move, the implied is now elevated to the two realized vols measures Specifically:

IV30™: 57.71
HV20: 46.42
HV180: 46.04

Let's turn to the Skew Tab.

We can see a normal skew shape across the front three expiration cycles with the ATM vol monotonically increasing to the shorter term options. There don't seem to be any particularly interesting skew kinks to trade around.

Finally, let's turn to the Options Tab.

Possible Trades to Analyze
The Nov ATM straddle is priced @ ~$2.60 with four trading days + an hour today at ~61 vol. Covering a vol sale with the wings one strike down (or up) is an interesting short-term position to analyze. Alternatively, selling the gamma in Nov against long vega in Dec could be either a four day trade, or a longer term bet into Dec.

This is trade analysis, not a recommendation.

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