Friday, March 30, 2012

Liz Claiborne (LIZ) - Stock and Vol Explode on Buyout Firm News

LIZ is trading $13.47, up 13.9% with IV30™ up 44.2%. The LIVEVOL® Pro Summary is below.


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Liz Claiborne, Inc. (Liz Claiborne) designs and markets a portfolio of retail-based brands, including JUICY COUTURE, KATE SPADE, LUCKY BRAND and MEXX.

This is a vol and stock note on "not quite a rumor." Let's start with the news and then below that, the tick chart (minute-by-minute) for the day. The top portion is the stock price, the bottom is the front month vol.

Liz Claiborne sought $20/share from buyout firms, WSJ says

Company not contemplating sale but PE firms have held talk, WSJ says.

Source: via Yahoo! Finance Liz Claiborne sought $20/share from buyout firms, WSJ says

I've circled the rather obvious spike in the stock and front month vol. It looks like vol rose to over 200% in Apr for a heartbeat and has fallen back don to Earth, but still a 44.2% rise for the day.

The stock hit $15.39, then came back down abut half way. As I'm writing this, LIZ is flirting with $14 and IV30™ is up to over 78% (a 65% pop).

Let's turn to the Skew Tab to see how each month (and each strike) is reacting to the equilibrium shifting news.

The front shows a huge upside skew (OTM calls vol rise as strikes rise). The entire month is well elevated to the back months and since the back two don't show as pronounced an upside skew, that vol diff to the OTM calls has gotten pretty large. Can you imagine if there were weekly options expiring today in this name? That would be awesome...

Also noteworthy -- the next earnings release for LIZ is likely in the May cycle and outside of Apr (that's a projection). So, ya know, May has a volatility event embedded in the options that Apr might not.

Next, 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).

On the stock side, we can see how the underlying has risen from ~$4 to now over $13 in less than six months... Whoa!... The 52 wk range in stock is [$4.02, $12.74], so the level today has breached an annual high (if it closes here). 

On the vol side, we can see how the stock was essentially falling asleep up until today.  The HV20™ hit 29.17% and the HV10™ is just 17.44%. See.. asleep. Then, there was today. Note that HV calcs are close-to-close, so those HV values will rise on Monday's chart as long as the stock stays elevated today. Interestingly, the vol level is still just in the 53rd percentile (annual), even after the climb today.

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

Apr, May and Jul are priced to 78.95%, 62.855 and 56.565, respectively. Note that the Jul 18 calls are priced to ~$0.40 mid-market... This was a $4 stock a few months ago, so, wow...

This is trade analysis, not a recommendation.

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