Wednesday, October 3, 2012

Kohl's (KSS) - Vol Spikes, Disrupts Term Structure; Earnings Vol Left Behind

KSS is trading $52.14, up 2.4% with IV30™ up 16.5%. The LIVEVOL® Pro Summary is below.


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Kohl’s Corporation (Kohl’s) operate family-oriented department stores that sells apparel, footwear and accessories for women, men and children; soft home products, such as sheets and pillows, and housewares.

I found this stock using a custom scan searching for names where IV30™ is up at least 10% on the day. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro. This one is cool b/c of the implications it has had on the term structure at large in a single day.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.

The KSS Charts Tab 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 a bumpy ride over the last six months, but broadening the perspective to the last six months, we can see the stock has essentially stood still.

On the vol side we can see an awesome run up in the implied of late. On 9-21-2012 the IV30™ was just 22.53%. As of this writing it's up nearly 42% in less than two weeks. The 52 wk range in IV30™ is [21.40%, 48.48%], putting the current level in the 40th percentile... but it's rising and is well above both the short-term and long-term historical realized vols.  The vol comps are:

IV30™: 31.96%
HV20™: 22.23%
HV180™: 25.62%

The Skew Tab snap (below) illustrates the vols by strike by month.

The red curve represents Oct, while yellow represents Nov. Note how elevated Oct is to Nov while the next earnings release is in Nov (and not in Oct). The move today has totally disrupted the term structure. Check out the Skew Tab from yesterday, below.

We can see how the two months were essentially on top of each other with little to no vol diff -- today, it's a totally different story.

Let's turn to the Options Tab, for completeness.

Across the op we can see the monthly vols are priced to 34.57% for Oct and 29.65% for Nov. Again, I believe the next earnings release for KSS is due out in Nov. Hmm...

This is trade analysis, not a recommendation.

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