Wednesday, January 11, 2012

Guess? (GES) - Elevated Front to Back Vol, Depressed Implied to Recent Stock Stagnation

GES is trading $29.51, down 3.9% with IV30™ up 3.9% as of ~11:15am EST. The LIVEVOL® Pro Summary is below.


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Guess?, Inc. (GUESS?), designs, markets, distributes and licenses apparel and accessories for men, women and children.

This is a vol note with two interesting phenomenon. One surrounds month-to-month vols, the other surrounds overall vol levels and comps. Let’s stat 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 first phenomenon relates to overall vol and vol comps. We can see in the stock chart that GES underlying has essentially stood still for the last few weeks. That “stagnant” behavior has dropped HV20 to 26.16%. The long-term trend (HV180) is 52.63% which is twice the HV20. In English, the annualized realized vol over the last 20 trading days is 26.16% while that same measure over 180 trading days is 52.63%. Tricky…

While the realized (past) vols are divergent, the implied is right in between. IV30™ is 40.60%. While the implied has been dipping, it hasn’t breached the 20’s as HV20 has. The 52 wk range in IV30™ is [28.49%, 75.21%], so the current level is in the 25th percentile (annual).

While the implied is depressed to it’s own history and the long-term historical realized vol, the month-to-month vols show another story. Let’s turn to the Skew Tab.

We can see the Jan vol is elevated to Feb. That vol diff is not earnings related, which is to say the next official earnings report should be in Mar (ish). But, as a retailer, GES does release monthly store comps (sometimes). Clearly the option market reflects elevated near-term (future) risk in GES – which is in contradiction to the short-term (past) historical realized movement.

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

I wrote about this one for The Street (OptionsProfits), so no specific trade analysis here. We can see Jan is priced to 47.29% while Feb is priced to 39.97% -- both of which are depressed to the HV180 and elevated to the HV20. It make sense that the option market reflects higher vol than the recent past, the question is, when does that "implied" move happen? If it's in less than 1.5 weeks, then Jan is a purchase. If it's in less than ~6 weeks, than Feb is a purchase. If it's after Jan expo but before Feb expo, then a calendar is one approach.

This is trade analysis, not a recommendation.

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