Friday, July 20, 2012

Monster Beverage Company (MNST) - Vol Explodes 60%; Vol Diff Expands in Calendar

MNST is trading $64.50, down 4.9% with IV30™ up 30.1%. The LIVEVOL® Pro Summary is below.


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Monster Beverage Corporation, formerly Hansen Natural Corporation, is a holding company. The Company develops, markets, sells and distributes alternative beverage. The Company’s category beverages brand names include Monster Energy, Monster Rehab, Monster Energy Extra Strength Nitrous Technology, Java Monster, X-Presso Monster, Worx Energy, Peace Tea, Hansen’s, Hansen’s Natural Soda, Junior Juice, Blue Sky, Hubert’s and Vidration.

This is a vol note in a stock that has been declining of late -- but the vol move today is odd in that... I don't see the news driving it.   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 a nice orderly rise in equity price from six months ago to mid June. The stock went from $52.26 (1-20-2012) to $78.72 (6-18-2012), or a 50.6% increase. However, since Jun 18, the stock is down 18%, and in the last two days the stock is down 10%.

On the vol side, we can see an abrupt rise in the implied as of yesterday which has continued well into today. IV30™ closed at 43.84% on 7-18-2012, rose 10.21 vol points or 23.3% yesterday, and is up another 16.28 vol points or 30.1%, today. The news is... I don't know... I read that there was a pretty rough article on Seeking Alpha discussing MNST's valuation, but that doesn't seem like news that would take vol up from 43.84% to 70.33% in two days (60%)... right?

Let's turn to the Skew Tab.

We can see how elevated Aug is to Sep -- note that the next earnings release for MNST is fast approaching and will be in the Aug cycle. Fair enough, vol should be elevated in Aug to Sep -- but check this out. I've included the Skew Tab from 7-18-2012, below.

In this pic, we can see that while Aug was elevated to Sep, it wasn't nearly as large a vol diff as there is today. The time spread opened up yesterday and has expanded today.  In other words, whatever the news was yesterday, it's having a greater effect today on vol today.

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

Across the top we can see that Aug is priced to 71.33% up 17 vol points today, while Sep is priced to 52.80%, up 8.8 vol points. Yesterday, Aug vol rose 10.5 vol points while Sep rose just 3.0. In English, the 7.5 vol diff expansion yesterday and ~9 vol point expansion today have created a substantial vol difference between Aug and Sep -- and the earnings cycle is does not seem to be the only (or even primary) reason for it.

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