Friday, January 6, 2012

Spreadtrum Communications (SPRD) - Short Interest Up 75%, Elevated Vol up 50%, Stock Down 40%

SPRD is trading $16.94, down 12.0% with IV30™ up 17.7%. The LIVEVOL® Pro Summary is included below.


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Spreadtrum Communications, Inc. is a fabless semiconductor company that designs, develops and markets baseband processor, radio frequency (RF) transceiver and turnkey solutions for the wireless communications and mobile television market.

I found this stock using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol. Keep in mind, this is a company based in China so all financial reporting is essentially vetted by the command center -- i.e. the government. The risks inherent in this company (and all Chinese stocks) are quite substantial from a systematic point of view. Obviously, the firm-specific risk also always exists.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20 LTE 10
HV180 - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated 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 selling elevated IV30™ simply because earnings are approaching.

The SPRD 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).

The stock closed just under $30 on 11-16-2011 and is now down more than 43% in less than two calendar months. On the vol side, the IV30™ was as low as 67.34% on 12-23-2011. Today it's up 48% from that level in just 14 calendar days. The 52 wk range in IV30™ is [37.78%, 224.67%]. The current IV30™ is actually below the 50th percentile (annual), though it is elevated substantially to the two historical measures I like to focus on. Specifically:

IV30™: 99.54%
HV20: 67.55%
HV180: 73.24%

I did read some interesting news yesterday from The Motley fool regarding short interest in SPRD. According to an article written by Rich Duprey, with as the source, SPRD had a 73.1% increase in shares shorted raising the total to float to nearly 10%. You can read the article here: Do the Shorts Know Something You Don't?

Let's turn to the Skew Tab, below.

I've only included the front two months. We can see a similar shape across both with a relatively "normal" skew. Neither month shows an "expected event" nor a single strike that's bid or offered substantially to the rest (wrt vol).

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

We can see Jan, Feb and May vol is priced to 100.67%, 99.23% and 95.95%, respectively. It's interesting to note that the Feb 8 puts are bid for size -- whoa...

This is trade analysis, not a recommendation.

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