Wednesday, March 27, 2013

EBAY - Vol Breaches Annual High Well Ahead of Earnings as Stock Continues to Rise

EBAY closed Monday's session at 52.09, up 1.5% with IV30™ up another 6.2% going from 36.63% to 38.89%. The LIVEVOL® Pro Summary is below.


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eBay Inc. is a global technology company that enables commerce through three reportable segments: Marketplaces, Payments, and GSI.

I noticed eBay tonight perusing the market because of the vol -- namely vol that has reached an annual high well ahead of earnings due out in mid Apr -- very close to Apr expiry. It's certainly expected that vol will rise into the event, which is why the fact that the implied has breached its annual high already caught my attention.

The one-year eBay 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 we can see the rather consistent move upwards over the last twelve months. One year ago, this was a $38.08 stock, so it's up 37% Y-O-Y. For those that haven't looked recently, this is nearly a $70 billion company... eBay! Whoa!

But, unlike so many posts I've published recently, this is a stock that is seeing near annual highs in stock price and is also seeing new annual highs in vol. Let's turn to the one-year IV30™ chart in isolation, below.

We can see that hypnotic vol pattern into and out of earnings, like almost every other firm. But this time things are different. The implied has breached its annual high and we are several weeks away from earnings. As that event nears, unless there is some sort of pre-announcement, the vol will continue to rise. In English, the annual high as of today will likely be shattered by the times earnings roll around in mid Apr. But the stock has been going up, so what's the happs? Honesty, I dunno... But I thought it was interesting enough to write about at 10:22pm EST.

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

Across the top we can see the monthly vols are priced to 40.52% for Apr and 32.91% for May. Although it seems like there is some ambiguity as to when earnings will be announced, the option market reflects a date inside Apr expiry. The 52 wk high in IV30™ is the current level (38.89%) with Apr already priced to 40.52%. My best guess is we could see 50% IV30™ in a couple of weeks, not to mention Apr vol in and of itself (IV30™ is a weighted average of two months).

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