Friday, December 16, 2011

Juniper Networks (JNPR) - Depressed Vol, Earnings Approaching

JNPR is trading $18.45, down 0.8% with IV30™ down 1.6%. The LIVEVOL® Pro Summary is below.


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Juniper Networks, Inc. (Juniper Networks) designs, develops, and sells products and services that together provide its customers with network infrastructure that creates responsive and trusted environments for accelerating the deployment of services and applications over a single network.

I found this stock using a real-time custom scan. This one hunts for low vols.

Custom Scan Details
Stock Price GTE $7
IV30™ - HV20™ LTE -8 GTE -40
HV180™ - IV30™ GTE 7
Average Option Volume GTE 1,200
Industry != Bio-tech
Days After Earnings GTE 32

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.

The goal with this scan is to identify short-term implied vol (IV30™) that is depressed both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not purchasing depressed IV30™ relative to HV20 simply because of a large earnings move.

The JNPR 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).

On the stock side we can see the price gap down on 7-27-2011 off of an earnings release. The stock dropped from $31.17 down to $24.66 on that day and eventually fell to $20.16 by 8-8-2011.

On the vol side, we can see how the implied is in fact depressed to the historical realized vols right now (and thus the trigger for the low vol scan). Specifically:

IV30™: 48.93
HV20: 58.41
HV180: 56.69

For the last two years, JNPR had earnings on 1-28-2010 and 1-25-2011. It's a reasonable assumption that JNPR will again release earnings in late Jan -- after Jan expo. As we saw above, JNPR does have a recent history of fairly dramatic price moves off of earnings. As of Monday the Feb options will start trading. I'd expect the Feb options to be elevated to Jan, but if not, well, then... not...

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

We can see that Apr is already priced above Jan in terms of vol -- in fact, the Jan expiry shows the lowest vol of any expiry in the entire chain, going all the way out to Jan 2014.

This is trade analysis, not a recommendation.

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