Friday, March 30, 2012

Potash Corp. (POT) - Depressed Vol into Earnings

POT is trading $45.59, up 1.3% with IV30™ down 6.9%. The LIVEVOL® Pro Summary is below.


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Potash Corporation of Saskatchewan Inc. (PCS) is an integrated fertilizer and related industrial and feed products company.

This is a vol note with earnings approaching. 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).

Although the stock charts loos roller coaster like, if you look at the vertical axis scale, the stock hasn't been "crazy volatile" over the last three months. The HV60™ (60 trading days ~ three months) is 31.43% which is well below the longer-term HV180™ of 42.58%. Looking to the implied, we can see that IV30™ is depressed relative to HV20™ and HV180™ as well as its own history. The col comps are:

IV30™: 31.17%
HV20™: 40.30%
HV180™: 42.58%

Further, the 52 wk range in IV30™ is [27.53%, 64.21%] putting the current level in the 10th percentile (annual). One note of interest, yesterday Stifel Nicolaus upgraded POT to a buy. I can't find any news that would drive the vol down nearly 7% today.

Let's turn to the Skew Tab.

I've included four expiries -- the one that ends today, the next weekly, and the Apr and May monthly cycles. Note that May (light blue) is priced above Apr monthly (green) -- that's a reflection of earnings which is likely in the May cycle but outside of Apr given the last two years reporting dates in calendar Q2 (4-29-2010, 4-28-2011). In fact, Livevol® has confirmed the 4-26-2012 date. Note that the weeklies are priced above May, however.

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

For the four expiries illustrated above we can see 36.54%, 34.07%, 31.17% and 32.93%, respectively. For the last two earnings cycles, IV30™ reached 43.79%, 35.13%. Odd how low that second number is... Note how similar it is to the IV30™ right now (taking into account that it will rise into earnings).

This is trade analysis, not a recommendation.

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