Monday, January 14, 2013

DELL - Stock Pops, Vol Explodes on Potential Private Buy-out News

DELL is trading $12.74, up 17.1% with IV30™ exploding up 83.0%. The LIVEVOL® Pro Summary is below.


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Dell Inc. (Dell) is a global information technology company that offers its customers a range of solutions and services delivered directly by Dell and through other distribution channels. Dell is a holding company that conducts its business worldwide through its subsidiaries.

DELL stock popped and vol exploded just after 2pm EST today. The Tick Chart is included below (top portion is stock price, bottom is Jan vol).

So here's the news on DELL if you don't already know:

Dell Inc. (DELL), the personal-computer maker that lost almost a third of its value last year, is in buyout talks with private-equity firms, two people with knowledge of the matter said.

Round Rock, Texas-based Dell is discussing going private with at least two firms, said one of the people, who declined to be identified because the talks are private. The discussions are preliminary and could fall apart because the firms may not be able to line up the needed financing or resolve how to exit the investment in the future, the people said.

Several large banks have been contacted about financing an offer, one of the people said.

Source: Bloomberg via Yahoo! news; Dell Said to Be in Buyout Talks With Private-Equity Firms, written by Serena Saitto & Jeffrey McCracken.

DELL shows up on so many vol scans it's hard count; suffice it to say these four caught my eye:

(1) Day Vol Gain
(2) Exploding Vol
(3) Calendar Spread Months 1 to 2
(4) Calendar Spread Months 2 to 3

Let's start with the Skew Tab, because of all the scans, it's the most compelling to me.

We can see a couple of phenomena here:
(1) There is a monotonic vol increase from the back to the front.
(2) The front month (5 day options) have a decidedly upside skew

Let's turn to 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 what has been a rather boring stock with implied vol in the 30% range and historical realized vol (short-term) even lower than that, has suddenly gapped up.

The vol side, well, how about a vol increase of ~85% in a few minutes?

Finally, let's turn to the Options Tab.

Across the top we can see Jan vol is up nearly 70 points from 28% on Friday, so a several hundred fold percent increase. Feb vol is up ~85% (Feb vol ~ IV30™ this close to Jan expo).

Here's the real question in the ultra short-term: "Will DELL go back down below say, $11.50 in the next few days (before this expo?)."  The vol is priced to over 100% on those puts. Perusing the news, this does not sound like a whisper that will fade into the wind -- at least not by Friday... Or will it?...

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