Friday, November 4, 2011

Veeco Instruments (VECO) - Stock Pops... Sort of...

VECO is trading $29.31,up 10.6% with IV30™ up 10.5%. The LIVEVOL® Pro Summary is below.


Click for Free Trial


Veeco Instruments Inc. designs, manufactures and markets equipment to make light emitting diodes (LEDs), solar panels, hard-disk drives and other devices. The Company operates in two segments: Light Emitting Diode (LED) and Solar, and Data Storage. In the LED & Solar segment, it designs and manufactures metal organic chemical vapor deposition (MOCVD) systems, molecular beam epitaxy (MBE) systems, Copper, Indium, Gallium, Selenide (CIGS) deposition systems and thermal deposition sources that it sells to manufacturers of high brightness LEDs (HB LED) and solar panels, as well as to research customers.

The company is up on news from China. Here's a snippet from a news story (from, I believe):

China today unveiled a three-step plan to eliminate incandescent light bulbs, in order to conserve energy and reduce its emissions, according to China daily.


Deutsche Bank thinks the announcement is positive for MOCVD manufacturers, particularly Veeco which the firm says has a strong presence in the Chinese market.
Source: Cree, Veeco climb after China unveils plan to phase out traditional light bulbs

Interesting... The company has traded over 15,000 contracts on total daily average option volume of just 2,593. Calls have traded on a 3:1 ratio (ish) to puts with the action in the Nov 28 calls. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size) if they are one-sided. While the largest print seems to be a purchase 2000x for $1.60, some of the 100 lots actually look like sales. Either way, the Oct vol is up more than 10 vol points (17.2%) and Dec is up 5.4 vol points (8.5%).

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

We can see a fairly "normal" skew shape and the term structure reflects monotonically increasing vol to the front (from the back). The Dec 35 calls show that bump in vol b/c the offer is high (above the Dec 33 and 34 calls -- i.e. that vol diff isn't real, it's just a wide market).

Finally, 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).

We can see the stock has been falling of late. In fact, the 52 wk low of $23.06 was set on 10-4-2011 -- so, exactly a month ago. The stock dropped $1.50 (ish) on 10-25-2011 off of the earnings release on 10-24-2011 (AMC) and the vol actually fell below the HV180 and HV20. After bottoming, the vol has popped again, and is now in the low 70's. The 52 wk range in IV30™ is [40.97, 80.92].

Possible Trades to Analyze
Lots of strikes, lots of vol in the front. The real question is whether or not this bounce is true -- i.e. is the stock now going to stop going down or is this just a one day (or multi-day) mirage. The fact that the stock is up "only" 10% might mean something?...  I mean, isn't China like, big 'n stuff?

Selling the front downside to own the back downside, even on a diagonal, giving up the strikes to the front to lower premium seem like interesting positions to examine. The ATM front straddle seems less exciting to me in terms of a vol sale -- the stock has moved ~$3 today and that straddle is worth ~3.60.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:

No comments:

Post a Comment