Thursday, January 12, 2012

Ciena (CIEN) - Depressed Vol

CIEN is trading $14.34, up small with IV30™ up 0.7%. The LIVEVOL® Pro Summary is below.


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Ciena Corporation (Ciena) is a provider of communications networking equipment, software and services that support the transport, switching, aggregation and management of voice, video and data traffic.

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 CIEN 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).

We can see the upside swing that CIEN has been on of late. On the vol side, we can see how depressed the implied is to the two historical realized vol measures. Specifically:

IV30™: 52.22%
HV20™: 65.12%
HV180: 73.87%

The 52 wk range in IV30™ for CIEN is [40.07%, 101.58%], so the current level is the 19th percentile (annual). Or, in English, the current implied is low not just relative to the historical realized vol measures, but also to its own history.

Let’s turn to the Skew Tab.

We can see the vol rises from the short expiries to the longer-term. The next earnings release for CIEN is likely in Mar, so the Apr options have that vol event, while the front two expiries do not.

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

I wrote about this one for TheStreet, so no specific trade analysis here. We can see the monthly vols are priced at 46.62%, 52.62% and 56.67%, respectively for Jan, Feb and Apr. That APR ATM straddle (which as earnings) is priced at ~$3.40 with a 52 wk range in CIEN stock price of [$9.89, $29.24].

This is trade analysis, not a recommendation.

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