Tuesday, December 13, 2011

Shutterfly (SFLY) - Rising Vol, Elevated Calendar, Dipping Stock

SFLY is trading $25.58, down 1.6% with IV30™ down 1.2% as of ~10:40am EST. The LIVEVOL® Pro Summary is below.


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Shutterfly, Inc. is an Internet-based social expression and personal publishing service that enables consumers to share, print and preserve their memories its technology, manufacturing, Web-design and merchandising capabilities.

This is a vol note, both with respect to the overall vol comps and the skew. SFLY closed as high as $66.70 within the last 12 months and is now more 60% off of that high. The 52 wk low is $24.06.

Barron’s released an article on 12-5-2011 noting the share decline and that with Apple’s online-photo business launch, SFLY shares could continue their drop. At the time, SFLY was trading $29.09.

Let’s turn to the Charts Tab (6 months), 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 drop in the upper portion. On the vol side we can see the implied is now elevated to both of the realized historical vols. Specifically:

IV30™: 70.54
HV20: 66.55
HV180: 60.14

The 52 wk range in IV30™ is [34.72%, 75%], so just as the stock is near its 52 wk low, the implied is near its 52 wk high.

Let’s turn to the Skew Tab to examine the month-to-month vols.

Check out that vol diff between the front tow expiries. Specifically, how elevated the front month is to the second. As of this writing, the vol diff on the 25 strike is just over 17 vol points.

Let’s turn to the Options Tab for completeness.

I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. I will say that while I like the slightly elevated implied and the elevated front to back, what I hate is the lack of liquidity in the options.

This issue trades ~500 calls and ~500 puts a day. That means, wide and illiquid markets. The ATM front month puts are $0.25 wide on a $0.45 bid – yikes. The Jan ATM puts are $0.40 wide on a $1.80 bid – also yikes.

This is a good lesson in option strategy scanning – it’s best to add an "average option volume" filter to make sure the results you find are in fact trade-able.

This is trade analysis, not a recommendation.

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