Tuesday, February 7, 2012

Pandora Media (P) - Vol Hits New Low as Earnings Approach

P is trading $14.47, down small with IV30™ down 8.6%. The LIVEVOL® Pro Summary is below.


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Pandora Media, Inc. (Pandora) is an Internet radio in the United States. As of January 31, 2011, it had over 80 million registered users. The Music Genome Project and its playlist generating algorithms enable it to deliver personalized radio to its listeners.

This is a vol note on a stock that has seen a massive upturn of late in stock price and with earnings approaching. Let's start with the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

In the stock portion we can see the rather abrupt rise from $9.79 (12-21-2011) to now $14.47, or up 47.8% in six weeks. The implied has taken the same train, but in reverse. On 11-21-2011 the IV30™ was 132.16% (the annual high). Today IV30™ has actually breached a new annual low (and now is just barely above) at 59.01%. That's a 55.3% drop in less than three months. The current level is essentially in the 0th percentile (an annual low). It's interesting to note that the next earnings cycle for P is right after Feb expo but in the Mar expiry. Weird given how low vol is...

Let's turn to the Skew Tab.

We can see that the Feb expiry shows the lowest vol ATM out of the front three. But, the downside skew in Feb is the most pronounced. That's actually kinda normal, but, given the new annual low in vol and the earnings date approaching in the Mar expo, it wouldn't have been crazy weird if the downside skew in Mar was actually elevated to Feb.

Finally, let's turn to the Options Tab, below.

Feb is priced to 55.44% vol and Mar to 59.43%. Just looking to the ATM straddle in Mar, we can see it's $2.05 x $2.35 while Feb is priced to $1.05 x $1.30.

This is trade analysis, not a recommendation.

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