Monday, November 21, 2011

Yahoo! (YHOO) - UPDATE: Elevated Vol Inflection

YHOO is trading $15.07, down 2.0% with IV30™ down 0.5%. The LIVEVOL® Pro Summary is included below.


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Yahoo! Inc. (Yahoo!) is a digital media company. Yahoo! provides engaging and canvases for advertisers to connect with their target audiences.

This is a follow up to the note I posted on 11-14-2011: Yahoo! (YHOO) - Elevated Vol, OTM Call Skew Bid, Vol Inflection Point?

In that post I noted the elevated vol in YHOO, but also that it sort of looked like the vol was gonna make a significant move up or down in the near future and not really hang. At the time IV30™ was 53.75. As of this writing, the vol is now up 5.53 vol points or 10.3%.

Let's start with the Charts Tab from a week ago: the top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

We can see the yellow line where I felt the inflection was. Now let's look at the same Charts Tab, but a week later (aka today).

And, for the sake of clarity, the vol chart blown up:

So there you have it -- the vol was elevated a week ago, and it's more elevated now. YHOO was trading $16.12 and is now trading $15.07, so $1.05 lower or 6.5% in a week. Specific to the vol comp, we have:

IV30™: 59.28
HV20: 39.04
HV180: 43.16

Let's turn to the Skew Tab, below.

The upside skew in the Nov weeklies and the Dec monthlies is persistent -- the takeover potential for this company is reflected in the option prices. It is interesting to note that the ATM vol in the front expiration is the lowest of the three.

Finally, let's look to the Options Tab (below) for completeness.

Possible Trades to Analyze
The vol sale at 60 does feel better than 54 (duh). Again, this is one where the real question becomes whether the risk is to the downside or the upside. Still, the ATM Dec straddle has fair value ~$1.85 -- cheap or expensive?... Or neither?

This is trade analysis, not a recommendation.

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