Tuesday, April 2, 2013

EXACT Sciences (EXAS) - The"Event" is Coming Very Soon... And it's a Big One...

EXAS is trading $9.70, down 0.8% with IV30™ down small. The LIVEVOL® Pro Summary is below.


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Exact Sciences Corporation is a molecular diagnostics company focused on the early detection and prevention of colorectal cancer. The Company’s Cologuard test is a non-invasive, stool-based DNA (sDNA) screening test designed to detect deoxyribonucleic acid (DNA) markers, which in published studies have been shown to be associated with colorectal cancer. In addition to DNA markers, its test includes a protein marker to detect blood in the stool, utilizing an antibody-based fecal immunochemical test (FIT).

This stock came up both on the elevated vol scan and the calendar spread scan. With earnings due out in May expiry, yet Apr vol is higher than May, we have a compelling story. Or, more simply stated, something big is coming... right now.

Let's turn to the two-year EXAS 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 a sort of reversal occurring over the last several months. The stock was headed straight up, but now is bending back down. Still this was a $7.42 stock two-years ago, so there has been some price appreciation. But this is a vol note if I've ever seen one, so let's look to the two-year IV30™ chart in isolation, below.

I don't think there's much to say other than, "hi, can I see some rising vol, please?" We can see an absolute explosion over the last week (ish) with IV30™ going well into new multi-year high territory -- in fact, it is nearly double it's prior annual high before this latest run-up. The option market is pricing in extreme risk for this stock relative to its prior history. But, there's more...

Let's turn to the Skew Tab.

We can see that Apr vol (red curve) is well above May vol (yellow curve). So what?... Well, EXAS is likely to release earnings in May expiry (and outside of Apr expiry). Said differently, the "event" that is reflected in the options prices is due out in Apr, not May... And further, the option market reflects substantially higher risk to this event than to earnings.

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

Across the top we can see that Apr vol is priced to 185.30% while May is priced to 142.67%. So there you have it... The "event" is coming... soon... Given the line of work this firm is in, let's hope it's good news, not for the sake of shareholders, but for the sake of all the people that need this to be good news.

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1 comment:

  1. The event is the announcement of the results of just one of its planned diagnostic trials, yet the anticipated date of Mar. 30 has been surpassed, so all investors are on pins & needles, thus, causing the high implied volatity. The IV was twice as high back in 2010, so the current IV is not actually that extreme for this stock.