Tuesday, December 6, 2011

Valassis Communications (VCI) - Calendar Vol Diff

VCI is trading $21.74, down 0.7% with IV30™ up 1.7% as of ~11:15am EST. The Livevol® Pro Summary is included below.


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Valassis Communications, Inc. (Valassis) is a media and marketing services company. The Company’s RedPlum media portfolio delivers value on a weekly basis to more than 100 million shoppers across a multi-media platform, in-home, in-store and in-motion.

This is a vol note, specifically related to the front two months and the vol diff that has opened up. Let’s start with the Skew Tab to examine the month-to-month and strike-by-strike vols.

While the shapes across the front two months are the same, the Dec options are priced to substantially higher vol than the Jan options – or in English, the red curve is higher than the yellow one.

Let’s turn to the Charts Tab (6 months), to examine the overall vol levels, trends and the stock price.

We can see that back in July this was a $31 stock and since then its had a fairly precipitous drop. But, since 11-29-2011 the stock has risen from $18.40 to now nearly $22.

On the vol side, for the period from 7-28-2011 to 11-22-2011, the short-term realized vol (HV20) was above the long-term realized vol (HV180). In English, the stock was moving at higher realized vol in the short-term than its long-term average. That trend ended a couple of weeks ago. Again, in English, the stock has begun to move with lower realized vol than its long-term trend. The implied is trading above both of those realized historical measures.

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 it's an interesting exercise to value those Jan puts if vol stays here and stock stays here into expiration simply to compare the vol diff in the calendar as actual dollar amounts rather than vol points.

This is trade analysis, not a recommendation.

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