Tuesday, April 3, 2012

Pandora Media (P) - Vol Hits New Low Weeks After Earnings Implosion

P is trading $10.43, up 2.8% with IV30™ down 0.9% as of ~10:15am EST. The LIVEVOL® Pro Summary is below.


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Pandora Media, Inc. (Pandora) is an Internet radio in the United States. As of January 31, 2011, it had over 80 million registered users. The Music Genome Project and its playlist generating algorithms enable it to deliver personalized radio to its listeners.

In fact, I’m listening to Pandora right now…

This is a vol note, specifically a new annual low in implied after a cataclysmic earnings move. Let’s start with the Charts tab (six months). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

The stock chart is rather… bumpy. We can see a rally into the most recent earnings release, and then an implosion after the news. P went from $14.27 down to $10.86 in one day – a 23.9% drop. The stock meandered lower to close at $10.03 on 3-29-2012, and now seems to have found an equilibrium in the mid $10 level. But, ultimately, it’s the vol that caught my eye. Looking to the bottom portion of the chart, we can see how the implied fell off of earnings (normal), and has continued to drop since. The 52 wk range in IV30™ is [48.20%, 132.16%], or in English, the level today is right on an annual low.

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

We can see a monotonic vol decrease from the back to the front. The next earnings release is due out in late May. For now, the option market reflects a greater probability that the event will be in the Jun expiry, but outside of May (Friday of expo week is May 18th).

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

I wrote about this one for TheStreet (OptionsProfits), so no specific trade analysis here. Looking across the top of the image we can see the monthly vols are priced to 47.81%, 51.85% and 56.74% for Apr, May and Jun, respectively. Looking back to the Charts Tab, we can see that P has been quite volatile, even without earnings results. The HV180™ is 73.68% -- keep that number in mind relative to the implied vols for each expiry.

This is trade analysis, not a recommendation.

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