Thursday, June 14, 2012

Lincare Holdings (LNCR) - Stock and Vol Rising Abruptly, Calls Trade

--- OVERVIEW ---
LNCR is trading $25.52, up 2.5% with IV30™ up 19.7%. The LIVEVOL® Pro Summary is below.


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Lincare Holdings Inc. (Lincare) is a provider of oxygen, respiratory and other chronic therapy services to patients in the home. The Company’s customers suffer from chronic obstructive pulmonary disease (COPD), such as emphysema, chronic bronchitis or asthma, and require supplemental oxygen, respiratory and other chronic therapy services.

--- ANALYSIS ---
This is a stock and vol note on a company that's been spiking up recently with vol abruptly moving in the same direction. Let's start with 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 that from late Mar to early Jun, LNCR stock dipped ~20%. But, it's the recent move that caught my attention. The weird thing is, I have no idea why it's popping.

On the vol side, we can see how the implied has risen with the stock, moving from 27.58% (6-12-2012) to now over 36%. That's a 32% increase in two days.

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

There's a beautiful back to front monotonic vol increase in the term structure, while the vols within each month have maintained their "normal" shape. The elevated vol from the front to the back reflects the risk embedded in earnings, which are likely due out just before Jul expo (but that's just a personal projection based on the last two Jul earnings dates).

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

Across the top, we can see the vol by expiry: 36.30%, 33.01% and 30.20%, respectively for Jul, Aug and Nov. I also note the trading today, the Jul 25 calls have traded 2,373x on just 211 OI. Those trades look like substantially purchases, with the price rising from $1.10 up to $1.30 over a half an hour period near the open.

I do also note that the stock volume is over 1.1 million shares against a daily average of just 806,584 shares, but, I don't see those calls trading with stock (at least not in an obvious way). In English, these look to be naked call purchases.

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