Wednesday, January 16, 2013

Constellation Brands (STZ) - Multi-Year Stock High Moves with Elevated Vol; Apr Earnings Vol Forgotten?

STZ is trading $38.62, up 6.2% with IV30™ up 11.1%. The LIVEVOL® Pro Summary is below.


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Constellation Brands, Inc. is a wine company. The Company is a marketer of imported beer in the United States. through its investment in Crown Imports, LLC (Crown Imports), a joint venture with Grupo Modelo, S.A.B. de C.V. (Modelo) pursuant to which Modelo’s Mexican beer portfolio (the Modelo Brands) are imported, marketed and sold by the joint venture in the United States.

This is a multi-level note in that the stock has breacjed a new high, the IV30™ has triggered the one-day vol gain scan, there is an interesting calendar vol diff and the overall level of the IV30™ has triggered the annual elevated vol scan.

Oddly, I can't really find any news for the stock or vol move today. Let's look at the Charts Tab (one-year) 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 large price appreciation over the last year, with the stock rising from $20.66 to now over $38.50. I note in particular that earnings gap up on 6-29-2012 which acted as a catalyst for the price rise. I also note that with the move today, STZ has set a new multi-year high in stock price.

In order to better examine the implied, I have included the one-year IV30™ chart in isolation, below.

We can see how the implied is spiking of late with the stock rise. The 52 wk range in IV30™ is [18.41%, 56.52%], putting the current level in the 94th percentile (annual). So, here we have an example of a stock that is rising to new highs and the vol is also rising -- a good reminder that while the rule of thumb of rising stock and falling vol is a good one, it's not always true.

Let's turn to the Skew Tab, and we'll find some more interesting phenomena with the vol.

The company just released earnings on 1-9-2013, with the next earnings release due out in Apr. However, we can see that Apr vol is priced below Feb (and Jan = 3 days). This presents an interesting opportunity where we have elevating vol in a stock hitting new multi-year highs with the catalyst to that stock break out being an earnings report -- yet the vol for the next earnings report is priced lower than the months in front. Very cool...

Finally, let's turn to the Options Tab.

Across the top we can see the monthly vols are priced to 54.49% and 47.28% for Feb and Apr, respectively. Again, if the next earnings report is in Apr, that's quite a discount to Feb and potentially to Mar in a stock where owning vega has been a winner.

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