Monday, April 29, 2013

Actavis (ACT) - Takeover Rumors Start the Fever; Vol Explodes 100%; Stock Reaches Annual High.

ACT is trading $106.48, up 5.5% with IV30™ up 95.3%. The LIVEVOL® Pro Summary is below.


Click for Free Trial


Actavis Inc., formerly Watson Pharmaceuticals, Inc., is an integrated global pharmaceutical company engaged in the development, manufacturing, marketing, sale and distribution of generic and brand pharmaceutical products.

I found this stock using a real-time custom scan. This one hunts for elevated vols.

What’s interesting is that this firm has earnings due out on 5-2-2013 BMO, but the vol explosion and price move have nothing to do with the earnings vol event. This is takeover fever… in a major way. The prior annual high in IV30™ was 31% -- as I’m writing this article the implied is trading just under 42%, now. The prior 52 wk high in stock price was ~$101, and the stock is trading well above that level right now as well.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200

The one-year ACT 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, even before today, we can see a nice appreciation over the last year. One year ago this was a $75.36 stock, so it’s up a lot even before the pop today. I also note the HV180™ (pink curve on the bottom portion of the chart) – that represents the realized historical volatility of the stock over the last 180 trading days, or about nine months. The stock moves at ~20% annualized clip – quite low for a pharma company – although this is a generic pharma company so, it’s not quite as spicy as the normal guys in this industry.

Of course, the real stock story is the pop today on news that over the weekend there may have been discussions about a takeover from Valeant Pharmaceuticals. Couple that with a raised price target from an analyst and you get… today. My source for this news snippet was

Let’s turn to the one-year IV30™ chart to see the incredible vol rise today.

That spike is just vertical. Rumor = 100% pop in IV30™; that’s the equation we’re looking at today. Wow…

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

Across the top we can see the monthly vols are priced to 42.08% in May and 32.32% in Jun. That elevated vol in May is due both to earnings and this takeover news. I do note the rise in vol for Jun and Aug as well (look at the little green numbers in parenthesis under the vol number). Those vol pops are not earnings related, but rather takeover related.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

This is trade analysis, not a recommendation.

Legal Stuff:

No comments:

Post a Comment