Tuesday, June 19, 2012

Youku.com (YOKU) - Chinese Stock Hits All-time Low in Vol; But What About Earnings?

YOKU is trading $24.32, up 0.6% with IV30™ down 4.3%. The LIVEVOL® Pro Summary is below.


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Youku Inc. (Youku), formerly Youku.com Inc., is an Internet television company in the People’s Republic of China. The Company’s Internet television platform enables consumers to search, view and share video content across multiple devices.

I found this stock using a real-time custom scan. This one hunts for low vols. This company has an extra twist, a firm that is hitting an all-time low in vol with a recent history of abrupt stock moves off of earnings.

Custom Scan Details
Stock Price GTE $10
IV30™ - HV20™ LTE -8 GTE -40
HV180™ - IV30™ GTE 7
Average Option Volume GTE 1,200
IV30™ Percentile LTE 10

The goal with this scan is to identify short-term implied vol (IV30™) that is depressed both to the recent stock movement (HV20™) and the long term trend in stock movement (HV180™). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), and want the annual IV30™ percentile to be in the bottom 10.

The YOKU Charts Tab (six months) is included (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 two abrupt moves off of the last earnings announcements. More recently, however, we can see a rather quiet period where the stock seems to have found an equilibrium.

On the vol side, we can see how depressed the implied is to the two historical realized measures. Even further, we can see how depressed the implied (red line) is to its own history. The 52 wk range in IV30™ for YOKU is [56.85%, 134.72%], or in English, the current level is an annual low. Looking back even further, the level of the implied today is in fact an all-time low. I've included a two year (almost) chart of just the implied, below.

I've drawn in that yellow line to clearly demonstrate how low the vol is relative to its past. The vol comps (from above) are included below:

IV30™: 54.42%
HV20™: 69.93%
HV180™: 82.67%
HV10™: 49.30%

I do note that the most recent ten trading days are showing a realized vol even below the implied. Very interesting when compared to the company's long-term historical realized trend of over 80% (see HV180™ above).

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

We can see how the front two expiries together (note one of those is a weekly) and the back two expiries together sort of form two distinct groups. That phenomenon is due to the next earnings release, which is due out in the Aug expiry (ish).

Finally, let's look to the Options Tab (below) for completeness.

We can see across the top that Jun (weeklies) and Jul are priced in the 53% range, while the two back months are priced to ~66%. Given the recent earnings moves, the substantially elevated vol relative to non-earnings months makes sense, but keep in mind that 66% would still only be in the 12th percentile (annual). Now that's something...

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