Thursday, February 16, 2012

Kohlberg Kravis Roberts (KKR) - Vol Pops in "Sleepy" Stock

KKR is trading $14.67, up 3.2% with IV30™ up 13.7%. The LIVEVOL® Pro Summary is below.


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Kohlberg Kravis Roberts & Co. is a private equity and venture capital firm specializing in acquisitions, leveraged buyouts, management buyouts, special situations, growth equity, mature, and middle market investments.

I found this stock using a custom scan searching for names where IV30™ is up at least 10% on the day. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.

The KKR 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).

KKR just released an earnings report a few days ago, though the vol moved rather small. There's a trend that has formed in the implied -- namely it's going down. In early Oct the implied was trading over 68%, today it's in the low 30's.

The implied has essentially been following the historical realized vol (short-term). We can see that the HV20™ was as high as 79.47% in Nov and now has dipped to 24.75%. In English, what was once a relatively volatile stock with an implied that reflected that volatility, has now become rather quiet and again, the implied reflects that reality... That makes today's vol pop rather interesting. The vol comps are:

IV30™: 32.88%
HV20™: 24.75%
HV180™: 55.87%

The Skew Tab snap (below) illustrates the vols by strike by month.

Not a whole lot going on here -- the skew shape is normal across all three front expiries. It is interesting that the front (one and a half day expiry) isn't elevated.

Finally, let's look to the Options Tab, for completeness.

All three months are priced between 32% and 34%. It'll be interesting to see if this is just a weird hick-up, or if KKR turns back into a 70 vol stock.

This is trade analysis, not a recommendation.

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