Thursday, January 24, 2013

Green Mountain Coffee Roasters (GMCR) - Vol Malaise Depresses Earnings Vol in Gapping Stock

GMCR is trading $43.72, up 6.4% with IV30™ up 9.0%. The LIVEVOL® Pro Summary is below.


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Green Mountain Coffee Roasters, Inc. (GMCR) is engaged in the specialty coffee and coffee maker businesses.

I found this stock using a real-time custom scan. This one hunts for vol gainers on the day. But the reality is, this is a depressed vol note, not in general, but in specific to the earnings release due out in early Feb. I've included the details of the scan below.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percent Change GTE 10
Average Option Volume GTE 1,200
IV30™ Change GTE 7

The goal with this scan is to identify names with rising IV30™ that also have a reasonable amount of liquidity in the options (thus the minimum average option volume) and enough strikes to spread and thus a minimum stock price. I also require a minimum vol level in order to avoid any boring ETFs (or whatever).

The two-year GMCR 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 I have highlighted in yellow most of the gaps the stock has experienced over the last two years -- and there are a lot of them. The catalyst to many of the big moves has been earnings. I bring this up b/c the next earnings report for GMCR is due out 2-6-2012 AMC.

In order to get a better view of the implied I have included the two-year IV30™ chart in isolation, below.

We can see the implied rising of late, then a small dip and then again, the pop today. More importantly, we can see that the IV30™ is right about in the middle of its annual range. In fact, it is in the 46th percentile (annual).

This is part of a larger phenomenon I am noticing -- while VIX is at multi-year lows (and thus individual stocks are at multi-year vol lows), when earnings are approaching, many stocks are not reacting "normally." What I mean is, an earnings event is a firm specific event, and in most cases, the implied should be near annual highs (say 80th percentile or higher), yet I am finding a bunch of names where the earnings vol has found the same malaise as the overall vol. But are stocks moving on earnings news? See AAPL and NFLX for an answer to that question.

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

Across the top we can see that Feb vol is priced to 96.36% and Mar vol is priced to 69.89%. First, the vol diff is huge between the two. Of course, there should be some elevated vol in Feb to Mar, but, yikes... Earnings are still two calendar weeks away which means that vol diff should expand quite considerably as we approach that Feb 6th date.  Second, 96% vol in this stock is kinda middle of the road...

Anyway, although the vol is high in absolute terms (this is a 100% vol stock), the malaise into earnings feels... odd?...

This is trade analysis, not a recommendation.

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This is trade analysis, not a recommendation.

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