Wednesday, April 3, 2013

Lululemon Athletica (LULU) - Vol Breaches Multi-Year Lows in a Sea of Rising Vols

LULU is trading $64.15, up 1.4% with IV30™ up 1.1%. The LIVEVOL® Pro Summary is below.


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Manufactures, distributes and sells technical athletics and yoga apparel. The Company works in cooperation with various athletes to create designs specific to meet their needs.

In a sea of red stock prices and rising vols, I found this stock using a real-time custom scan that hunts for depressed vols. LULU vol is at a multi-year low.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 20
IV30™ Percentile LTE 10
Average Option Volume GTE 1,200

The goal with this scan is to identify short-term implied vol (IV30™) that is depressed to its own annual history (at most in the 10th percentile). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), and I want a minimum vol level so I don't pick up any boring ETF’s (or whatever). The stock price requirement helps me identify names that have enough strike prices to trade or spread.

The LULU one-year 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).

More than anything, I note how choppy (read: volatile) the stock price has been over the last year. If we look at the vertical axis, we can see in fact that the volatile stock is in fact not quite as abrupt as first blush would appear. The 52 wk range in stock price is [$52.20, $81.09].

But, this is a vol note, so let's look at a two-year chart of the IV30™ in isolation.

The observation is rather simple -- the implied is now at multi-year lows. How odd....

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

Across the top we can see tat Apr vol is priced to 30.13% and May is priced to 30.91% -- so nearly identical risk reflected by the option market. This is a good name to follow, especially if you find yourself getting short vega and need a hedge.

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1 comment:

  1. What do you mean exactly when you say "This is a good name to follow, especially if you find yourself getting short vega and need a hedge." Do you mean go long a calendar b/c it is cheap and get long Vega?