Monday, March 19, 2012

Cree (CREE) - Vol Up, Stock Up, Earnings Approaching

CREE is trading $31.94, up 3.7% with IV30™ up 8.0%. The LIVEVOL® Pro Summary is below.


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Cree, Inc. (Cree) develops and manufactures semiconductor materials and devices primarily based on silicon carbide (SiC), gallium nitride (GaN) and related compounds.

This is a vol note in a spiking stock with earnings approaching. Let's start with the tick chart, below. The top portion is the stock price, the bottom is the vol for the Apr expiry.

I've highlighted that stock pop this morning. It's interesting that the vol popped as well, but then has fallen off as the stock kept rising.

Let's turn to 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).

On the stock side, we can see the underlying has risen to a near six month high. On the vol side, while the implied is still depressed relative to its history (33rd percentile annual), the move today has pushed it above the short-term historical vol (HV20™). The vol comps are:

IV30™: 58.10%
HV20™: 53.35%
HV180™: 66.45%

The 52 wk range in IV30™ is [39.61%, 94.84%].

Let's turn to the Skew Tab.

Interestingly, as the stock has pushed higher and vol has increased with the stock, the Mar (W) expiry is priced to the lowest vol of the front three expiries. Apr is priced above May. We're projecting the next earnings release for CREE is 4-17-2012, so vol should be rising into that expiration.

Let's turn to the Options Tab, for completeness.

The option market reflects a vol event (probably earnings) in the Apr expiry. The vols are priced to 48.45%, 58.10% and 54.93% for Mar23 (W), Apr and May, respectively. The 52 wk range in stock price for CREE is [$20.25, $50.58]. Note the pricey downside skew (over 70%) in Apr as earnings approach.

This is trade analysis, not a recommendation.

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