Thursday, March 1, 2012

Riverbed Technology (RVBD) - Depressed Vol Nears Annual Low

RVBD is trading $28.59, up 0.4% with IV30™ unched. 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 – specifically depressed implied. 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 abrupt drop off of the last earning release. The stock fell from $29.92 to $24.45 or an 18.3% drop. Since then, the stock has risen from that below $25 level to now back over $28.50. On the vol side, we can see the implied has fallen since earnings (as expected), an d remained depressed since then. The 52 wk range in IV30™ for RVBD is [4062%, 96.71%]. The current level put sit in the 5th percentile (annual). It’s this level of the implied that caught my attention.

Let’s turn to the Skew Tab to examine the line-by-line and month-to-month vols.

We can see that the front expiry (Mar) is in fact the lowest of the three front months, with Apr (the middle) the highest. For the last two years earnings for RVBD have been on 4-22-1010 and 4-19-2011. Apr options expire this year on 4-20-2012. So, in English, the earnings date as of right now is ambiguous as to which options cycle it falls into. Tricky…

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

I wrote about this one for TheStreet (OptionsProfits), so no specific trade analysis here. Across the top of the Tab we can see 35.75%, 46.62% and 46.67% vols for Mar, Apr and Jun, respectively. That vol in Jun is tasty since we know it has an earnings event embedded. But, if earnings are in Apr, it might be more tasty to examine the Apr options for less premium.

This is trade analysis, not a recommendation.

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