Friday, February 10, 2012

Riverbed Technology (RVBD) - Vol Pops Off of Annual Low; Stock Gathers Momentum After Earnings Swoon

RVBD is trading $27.76, up small with IV30™ up 16.5%. The LIVEVOL® Pro Summary is below.


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Riverbed Technology, Inc. (Riverbed) has developed solutions to the fundamental problems associated with information technology (IT) performance across wide area networks (WANs).

This is a vol note along with order flow. On a day that the broader markets are down across the board, RVDB is up small, but with a significant pop in vol. Let's start with some order flow.

The company has traded 23,741 contracts on total daily average option volume of just 8,472. Calls have traded on an 8.3:1 ratio to puts. The action has been in the Mar 32, Feb 30 and Mar 30 calls. It's also interesting to note that retail order flow is opening long calls in this name: see the ISE Sentiment (the number of opening long calls and puts from retail accounts on ISE). The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls in Feb have traded smaller than existing OI while the Mar 32 calls are mostly opening (compare OI to trade size). The Mar calls look like purchases for the most part (though there is some ambiguity). The Feb 30 calls are also ambiguous, although the largest trade looks like a sale of 587 @ $0.15.

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

We can see that the Jun expiry has the highest vol for the ATM options. The Feb OTM options show that parabolic skew due to the "stickiness" of OTM option prices near expo.

Finally, the Charts Tab (six months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

This is a cool chart for a few reasons.

1. On the stock side, we can see the recent swoon that was earnings. RVBD gapped down 18.3% off of the report.

2. After closing at $23.81 on 1-30-2012, the stock has rallied back more than 16% to its current level.

3. On the day of earnings, RVBD IV30™ closed at 58.97%. Just a few days later the implied hit the annual low of 40.61%. The range in IV30™ for the year is [40.61%, 96.71%]. That puts the current IV30™ in the 14th percentile even after the spike, today.

It looks premium buyers are active today in this name and given the recent moves and the current vol levels, that kinda makes sense. It looks like retail order flow is a bit one-sided to deltas -- i.e. a bet on a stock move up.

This is trade analysis, not a recommendation.

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