Wednesday, September 26, 2012

Big Lots (BIG) - Depressed Vol in Gapping Stock with a Downturn Trend

BIG is trading $29.69, up 0.3% with IV30™ up 0.5%. The LIVEVOL® Pro Summary is below.


Click for Free Trial


Big Lots, Inc., through its wholly owned subsidiaries, is a North America's closeout retailer. At January 28, 2012, the Company operated a total of 1,533 stores in two countries: the United States and Canada.

I found BIG using a real-time custom scan. This one hunts for low vols. But this one is compelling b/c of how violently the stock has gapped in the last six months.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV60™ GTE 1
IV60™ - HV60™ LTE -8 and GTE -40
HV180™ - IV60™ GTE 8
Average Option Volume GTE 1,200
Industry != Bio-tech

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol Pro&#8482.

The goal with this scan is to identify intermediate-term implied vol (IV60™) that is depressed both to the intermediate stock movement (HV60™) 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 to avoid bio-techs (and their crazy vol).

The BIG Charts Tab is included (below). The top portion is the stock price, the bottom is the vol: IV60™ - yellow vs HV60™ - blue vs HV180™ - pink.

On the stock side we can see those two awesome gaps down in the last six months. on 4-24-2012, the sock dropped from $45.71 o 34.71 (-24%) and on 8-23-2012 from $38.84 to $30.76 (21%). The second drop was on an earnings release. The first was on a changed outlook (same stores quarterly sales revised down). I also note the recent down trend in stock price. On 9-14-2012, the stock traded as high as $31.90 and closed at $31.83.  today, we're at $29.69.

On the vol side we can see how the IV60™ has remained fairly calm throughout the last six months and is in fact kinda "lowish" right now relative to the recent past. The HV60™ is artificially elevated b/c of the earnings cataclysm. Having said that, he HV10™ is still elevated o IV60™, so there is a reasonable vol diff here to investigate. The comps are:

We can see:
IV60™: 32.60%
HV60™: 53.65%
HV180™: 50.62%
HV10™: 32.89%

The IV30™ is in the 34th percentile (annual) -- so it's also a bit low relative to the annual range and this is as the stock has started a downtrend.

Let's turn to the Skew Tab.

We can see a normally shaped skew, with the two months lying on op of each other. The next earnings cycle is due out in Dec, so neither of the front two expiries have that vol event. I'm not sure when the outlook numbers come out though, and given the reaction in April, I'd look that date up before trading this name.

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

Across the top we can see the monthly vols are priced to 31.59% and 31.69% for Oct and Nov, respectively. It's an interesting position to analyze going long Nov juice and selling Oct juice in the hopes that either, a big move comes after Oct, or no move comes but the vol rises in Nov given that it is depressed relative to the historical measures.

This is trade analysis, not a recommendation.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

Legal Stuff:

No comments:

Post a Comment