Tuesday, November 13, 2012

Western Digital (WDC) - Depressed Vol in "Fiscal Cliff" Fearing Environment

WDC is trading $35.00, up 0.8% with IV30™ down 3.5%. The LIVEVOL® Pro Summary is below.


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Western Digital Corporation (WD) is a provider of solutions for the collection, storage, management, protection and use of digital content, including audio and video. Its principal products are hard drives, which are devices that use one or more rotating magnetic disks (magnetic media) to store and allow access to data.

This is a quick vol note -- for those of you that are vega buyers, this could be an interesting one. I found WDC on a low vol custom scan. Let's start with 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 pretty volatile ride with rather large ebbs and flows in the underlying price including a gap up on an earnings announcement in late Jul 2012. The 52 wk range in stock price is [$24.80, $45.65].

But it's the vol that caught my eye. I have included a vol chart for the last year, with just the IV30™, below.

It's easy to see here both how depressed the implied is right now and how high it has been over the last year. The 52 wk range in IV30™ is [32.15%, 63.40%], putting the current level in the 8th percentile (annual).

Let's quickly turn to the Skew Tab.

We can see a rather pretty skew shape for both Dec and Jan'13. I believe the next earnings release should be after Jan' expiry -- so we're looking at vol ex-earnings in this skew chart.

Finally, let's turn to the Options Tab.

Across the top we can see that Dec and Jan'13 are priced to 34.75% and 36.93%, respectively. I do note the rise in Apr vol which does have an earnings release embedded in it. In any case, I though this was a compelling low vol name to examine in a "fiscal cliff" fearing market.

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This is trade analysis, not a recommendation.

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