Wednesday, January 9, 2013

Urban Outfitters (URBN) - Calendar Spread Opens -- News is Coming Out in the Next 10 Days

URBN is trading $41.34, up 0.4% with IV30™ up 11.6%. The LIVEVOL® Pro Summary is below.


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Urban Outfitters, Inc. (Urban Outfitters) is a lifestyle specialty retail company, which operates under the Urban Outfitters, Anthropologie, Free People, Terrain and BHLDN brands.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.

The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated front month vol simply because earnings are approaching.

Let's start with the Skew Tab, below.

We can see pretty clearly how elevated the front month is to the back. While the skew shapes are similar, the vol diff has opened up significantly, or in English, the option market reflects substantially more risk in the near-term (next 10 days) than the intermediate-term.

Now we can turn to the one-year Charts Tab (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 abrupt rise over the last year in share price, with the stock up in the 80% range since the lows in late Jan 2012.

On the vol side all seems rather normal -- that is, the implied and the two historical realized vol measures sort of converge at the same point right now. This is circumstantial evidence that IV30™  may be priced "fairly."

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

Across the top we can see the monthly vols are priced to 46.77%, 33.45% and 35.60% for Jan, Feb and Mar. Considering that the next earnings report is due out in Mar, this is a bit of an odd term-structure. My best guess is that some sort of revenue / sales / holiday update is due out soon and that's equivalent in many ways to an earnings report. With Jan vol up 9 points today, I also am guessing that the news is due out soon.

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1 comment:

  1. I did a 39p 43c double calendar based on this analysis just before close yesterday and am up $450 this morning --- thinking there might be something to this scanning & analysis stuff! :-)