Wednesday, February 29, 2012

Lions Gate Entertainment (LGF) - Elevated Vol; Calendar Vol Diff and News

LGF is trading $13.46, up small with IV30™ down 4.1% as of ~11am EST. The LIVEVOL® Pro Summary is below.


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Lions Gate Entertainment Corp. is a global entertainment company with a diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, digital distribution and new channel platforms.

I found LGF because of a vol diff that has opened up between the second and third expiries. Let’s start with the Charts Tab (six months). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side we can see an awesome run up in the underlying price.  LGF was a ~$6.50 in Sep of 2011 and it’s now more than double that. On the vol side, we can see how elevated the implied had gotten, reaching as high as 76.78% into earnings. Here’s a quick snippet covering that earnings release:

Lions Gate Entertainment Corp. says it reduced its loss in the quarter as it cut expenses. Revenue fell because it didn't have any movies in wide release in theaters. The movie studio acquired "Twilight" maker Summit Entertainment last month and has the first "Hunger Games" movie out in theaters next month.

Source: AP via Yahoo! Finance -- What earnings reports reveal about entertainment

While vol has fallen since then (as expected), the implied is still elevated to both of the historical realized measures I like to use. Specifically:

IV30™: 57.68%
HV20™: 49.76%
HV180™: 38.38%

If you read the news surrounding LGF, things are definitely moving. Let’s turn to the Skew Tab to examine the month-to-month (and line-by-line) vols.

We can see Apr is substantially elevated to Jun. Interestingly, LGF releases earnings on 2-9-2012 AMC, so the next earnings report should be in May. In English, those Jun options have an embedded earnings report that Apr does not while the vol in Jun is depressed to Apr.

Finally, let’s turn to the Options Tab.

I wrote about this one for (OptionsProfits), so no specific trade analysis here. We can see Apr is priced to 59.64% vol while Jun is priced to 52.10%. When I peruse the news surrounding LGF, I see upgrades and downgrades – bulls and bears. Lots of “stuff” going on from acquiring Summit to attempting a sale of the TV Guide Channel. I think the elevated vol makes sense, especially given the recent stock climb.

This is trade analysis, not a recommendation.

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1 comment:

  1. You negate to mention the giant catalyst that is causing the recent runup and why April calls are trending higher even though there is no earnings - the release of LGF's first Hunger Games movie in late March (after March options expire)