Friday, June 8, 2012

IMAX Corporation (IMAX) - Calendar Spread Opens as Risk Increases for Summer Movies

IMAX is trading $19.76, down 0.4% with IV30™ up 0.5%. The LIVEVOL® Pro Summary is below.


Click for Free Trial


IMAX Corporation, together with its wholly owned subsidiaries, is an entertainment technology companies, specializing in motion picture technologies and presentations. The Company’s principal business is the design and manufacture of premium theater systems (IMAX theater systems) and the sale, lease or contribution to customers under revenue-sharing arrangements of IMAX theater systems.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.

The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated front month vol simply because earnings are approaching.

Let's turn to the Skew Tab to examine the monthly vols.

We can see pretty clearly the vol diff that has opened up between the front month (six trading days left) and the back months. The next earnings release for IMAX should be in late Jul (after Jul expiry). The "event" that's pushing vol in the front is possibly the release of several blockbusters that will be screened on IMAX screens (like MIB3, etc). It is interesting to note the upside skew in the front expiry reflecting greater upside risk (potential) than downside risk in the very near-term.

Some other company specific news surrounds what seems to be some nice expansion abroad. I've included a few snippets from below:
6-7-2012: IMAX expands partnership in China with five-theater deal (20.10 +0.15)

Co and Omnijoi Cinema Development, formerly known as Jiangsu Eudemonia Blue Ocean Cinema Development, announced an agreement to install five IMAX theatre systems into new construction projects throughout China. This agreement follows the earlier eight-theatre cooperation and brings Omnijoi Cinemas' total IMAX commitment to 13 theatres, which includes a theatre currently open in the city of Suzhou and another that is slated to open in the city of Nanjing, Zhejiang Province in July. Under terms of the new agreement, Omnijoi Cinemas will install five IMAX theatre systems in the cities of Qingdao, Nantong, Suzhou and other cities, all of which are slated to open in 2014 and 2015.

5-30-2012: IMAX Corp. (IMAX) and Columbia Pictures confirmed Men in Black 3 grossed $12.7 mln at the box office in 474 IMAX theatres worldwide during its 4-day opening weekend beginning May 25.

5-29-2012: IMAX (IMAX) and Cineworld Group, a cinema chain in the UK, announced an expansion of the companies' revenue sharing agreement with the addition of up to five new IMAX theatre systems.

Source: Provided by (

Let's turn to the Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Two interesting phenomena here:

1. On the stock side we can see the recent drop. On 5-1-2012, the stock closed at $25.03. As of this writing the stock is down 21% since that date.

2. On the vol side we can see the rise in IV30™ over that same time frame from 44.74% to 58.03% or a nearly 30% rise. As of right now, the IV30™ is trading above both of the historical realized vol measures, and the front month is trading above all of those measures. Specifically:

IV30™: 58.03%
HV20™: 37.70%
HV180™: 49.81%
Jun IV: 71.56%

In English, the option market reflects elevated forward looking risk in the very near-term (one week), and the next 30 days, relative to the actual realized vol.

--- SUMMARY --
Finally, let's look to the Options Tab (below).

Across the top we can see the monthly vols are 71.56%, 58.03% and 56.32% respectively for Jun, Jul and Sep. Note again how elevated Jun is to the the other two months and that Sep has an earnings cycle (vol event) embedded in it. Another point to note is that movie revenue (called gross) is listed daily, so investors don't have to wait for an earnings report from IMAX to get a feel for what's goin' on.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment