Tuesday, October 16, 2012

Red Hat (RHT) - Depressed Vol and Annual Low in HV10

RHT is trading $54.39, up 0.5% with IV30™ down 3.1%. The LIVEVOL® Pro Summary is below.


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Red Hat, Inc. (Red Hat) is engaged in providing open source software solutions to the enterprise, including its Red Hat Enterprise Linux and JBoss Enterprise Middleware.

I found this stock using a real-time custom scan. This one hunts for low vols -- specifically ones in the bottom 10th percentile for IV30™ for the year.

The RHT 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 bunch of sideways movement -- so much so that the HV60™ is just 31.19% and the HV10™ is just 12.56%. Whoa...that's low.... The 52 wk price range in RHT is [$39.19, $62.75].

On the vol side we can see how the implied has nestled in between the HV20™ and HV180™. The 52 wk range in IV30™ for RHT is [28.78%, 67.23%], putting the current level in the 7th percentile.

I've included a one year chart of the HV10™ below -- I know don't normally use this measure, but stick with me for a sec.

Two things that I note:
1. Look how low the measure has become -- that's an annual low and reflects that over the last ten trading days the stock has moved at an ~12% (annualized) rate.
2. Look how high the measure can get off of earnings, or even apart from earnings cycles.

The implied is priced in the 7th percentile and I believe that's in part due to the last 10 trading days of literally, "ho-hum" trading. I dunno, kinda feels low, no?

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

Across the top we can see the monthly vols are priced to 31.66%, 31.68% and 38.04% for Oct, Nov and Dec, respectively. Dec likely has an earnings release (though that's not a sure thing), as thus the elevated vol. In any case, the low vol in RHT caught my eye -- maybe it trades like a 30% vol stock for a while... but maybe it doesn't...

This is trade analysis, not a recommendation.

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