Tuesday, October 23, 2012

Expedia (EXPE) - Vol Reaches Multi-year Highs After Consecutive Earnings Blow-outs. Earnings Due Out in Two Days -- Vol Shows It.

EXPE is trading $53.60, up 2.4% with IV30™ up 2.1%. The LIVEVOL® Pro Summary is below.


Click for Free Trial


Expedia, Inc. (Expedia) is an online travel company. As of December 31, 2011, the Company's portfolio of travel brands featuring supply portfolio, including over 145,000 hotels in 200 countries, 300 airlines, packages, rental cars, cruises, as well as destination services and activities

This is an elevated vol note -- a pretty simple one in the reasoning, a pretty compelling one in the reasoning as well. EXPE has earnings due out 10-25-2012 AMC -- or in English, in two days.

Let's look to 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 huge run up over the last half-year, with the stock rising from $31.39 to now over $53, or more than 70%. Looking carefully at that stock chart we can see two earnings results (the blue "E" icon). On both of those days, the stock gapped up on the news -- i.e. the market liked it a lot. The 52 wk range in EXPE price is [$25.19, $60.29].

On the vol side, it's fascinating to note that on the first earnings blow out on 4-26-2012 (AMC), the implied only rose to 35.34% ahead of the announcement. Then, on the next earnings report, the IV30™ rose to 67.80% just before the announcement. That's nearly a doubling in vol, yet the stock still moved more than the implied. We are now just days away from the next earnings release and the IV30™ is sitting above 70% -- and that is not just an annual high, but a multi-year high. the 52 wk range in IV30™ was [23.31%, 69.55%] -- of course, we're well over that now.

Rater than show the skew, which is gonna look exactly as you would expect, the front is elevated substantially to the back-- let's just turn to the Options Tab.

We can see across the top how the Nov options are priced to 73.79% -- it's odd but the vol might actually drop slightly tomorrow if vega sellers come in at these levels. Of course, the standard expectation would be even higher vol as the earnings date approaches. Note that the ATM strangle (50/55) is priced $5.80 x $6.10, or, in English, a stock price in between [$44, $60] is kind of.... the norm... Hmmm...

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment