Thursday, December 1, 2011

Texas Industries (TXI) - Stock Explodes on News, Then Doesn't...

TXI is trading $28.05, up 10.7% with IV30™ up 30.8%. The LIVEVOL® Pro Summary is below.


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Texas Industries, Inc., is a supplier of heavy construction materials in the southwestern United States. The Company operates in three segments: cement, aggregates and consumer products.

The company exploded earlier today all the way up to $35.84 on some news that was released from a conference. First the news below, then the tick chart (one-day).

Texas Industries spikes after one of the largest stockholders of the company agreed to terminate immediately the Standstill Agreement that prevented it from acquiring more than 20% of the outstanding common shares.

Source:Provided by (

The top portion is the one-day minute-by-minute tick chart for the stock, the bottom is the same for the Dec vol. We can see the incredible pop off of that news. It's interesting how the Dec vol has mimicked the stock price -- essentially the same chart repeated. The stock has come significantly off of that peak -- we're talking $8 or 22% in a matter of hours.

Let's start with 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).

The stock had been on a pretty consistent downward trend until a few days ago. Then there was today's news... It is interesting to note how well the implied tracks the historical vol. Note the HV180 (pink) -- it has steadily increased since early August. In English, the stock's realized vol has been increasing over the last four months to the tune of ~70% increase.

Let's turn to the Skew Tab to check out the shape of the month-to-month and strike-by-strike vols.

The skew in the front month is parabolic -- which makes sense given the huge jump up, then drop down, and semi-steady state of up 10% (ish). The elevated front to back makes sense given the risk in the near-term of a retracement or another pop as the news gets digested (and potentially more comes out).

Finally, let's turn to the Options Tab for completeness.

Possible Trades to Analyze
Pretty simple question, incredibly difficult answer -- is the move over? If it is, that 30% up vol is a sale. If it isn't, vol is cheap given that the stock can apparently move $10 in a day.

This is trade analysis, not a recommendation.

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