Tuesday, January 31, 2012

Polypore International (PPO) - Stock Collapsing and Vol Exploding Right Now, Because?...

PPO is trading $41.46, cascading down 23.7% with IV30™ exploding up 42.1%. The LIVEVOL® Pro Summary is below.


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Polypore International, Inc. is a global high technology filtration company that develops, manufactures and markets specialized microporous membranes used in separation and filtration processes.

Let's start with the Tick Chart for PPO. The top portion is the stock price, the bottom is the front month vol -- these are one minute bars for today only.

What's so interesting is that the stock has been steadily imploding (and the vol steadily exploding). That is, the stock didn't open down size, nor has it reacted to a bit of mid-market day news. It's just going down... and it's not stopping.

In terms of news, other than a downgrade well after most of the drop, I have no idea what's going on here. 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 collapse today in stock price and the vol pop in relative comparison to the past six months. The 52 wk range in PPO was [$42.43, $74.21] before today. So, in English, the stock has hit an annual low. The 52 wk range in IV30™ is [43.41%, 86.38%]. The current level sits in the 82nd percentile.

The fact that vol isn't well above an annual high essentially assures me that the news (whatever it is) is known. Otherwise I'd bet not only an annual high in vol, but perhaps a multiple of that high. Let's turn to the Skew Tab.

We can see a monotonic vol increase from the back to the front months with Feb showing a parabolic shape. That is, the front month reflects both upside and downside risk. Still, I would have expected the front to be considerably more elevated to the back if this was truly a "mystery." Or, said differently, this isn't a mystery to a lot of people.

Finally, let's turn tot the Options Tab.

We can see the monthly vols are 77.75%, 72.645 and 64.50%, respectively, for Feb, Mar and Jun. The ATM Feb straddle is quoting at $4.80 x $6.30. The width of that market makes sense. Still, is ~$5.55 (mid-market) for the ATM straddle really expensive given the recent move? I dunno... Seems like it would be higher...

As I'm about to publish this article, the stock is trading down to $39.80 and IV30&#8482 is 80.81%.  The ATM straddle market has tightened to $5.85 x $6.40. Mid-market is now $6.125.

This is trade analysis, not a recommendation.

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