Monday, October 22, 2012

Riverbed technology (RVBD) - Vol Nears Multi-year Lows as Stock Starts to Move

RVBD is trading $23.21, up 0.6% with IV30™ up 3.3%. The LIVEVOL® Pro Summary is below.


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Riverbed Technology, Inc. (Riverbed) has developed solutions to the fundamental problems associated with information technology (IT) performance across wide area networks (WANs).

This is a vol note, specifically a depressed vol note on a stock that just had earnings and may be moving away from a "quiet" period. 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 the nice little bounce off of the earnings report a few days ago. Other than that, the stock has been sort of stuck in an equilibrium -- quite limited realized vol. The 52 wk range in stock price is [$13.30, $30.73].

On the vol side we can see how much the implied has fallen off from the earnings report (which is normal). What caught my eye is how low the IV30™ has dipped. The 52 wk range in IV30™ is [40.55%, 91.99%], putting the current level in he 2nd percentile. In English, RVBD IV30™ has almost reached its annual low which is essentially a multi-year low.

Let's turn to the Skew Tab.

We can see a rather "blah" skew, with the shapes similar across all months and the ATM vol in Nov lower than the other two back months. Basically, not a whole lot goin' on in the skew.

Finally, let's turn to the Options Tab.

Across the top we can see the monthly vols are priced to 41.72%, 43.14 and 45.645, respectively for Nov, Dec and Jan. Ultimately I found his stock compelling b/c the implied has dipped so low off of earnings that it's nearing multi-year vol lows just as the price is starting to move higher (and HV20™ is rising).

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