Friday, May 10, 2013

Boyd Gaming (BYD) - Stock Rips 200% in Six-Mos; Up 60% in 3 Weeks... But What About the Vol?

BYD is trading $14.08, up 7.4% with IV30™ down 2.2%. The LIVEVOL® Pro Summary is below.


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Boyd Gaming Corporation (Boyd Gaming), incorporated in June 1988, is a multi-jurisdictional gaming company. The Company is an operator of 16 wholly owned gaming entertainment properties and one controlling interest in a limited liability company.

This is both a vol and stock story in a firm that is smashing through multi-year highs but is still gigantically away from levels reached in 2008 when it traded above $50 (not a typo).

Let's start with 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 that abrupt stock price pop of late. It's hard to believe, but in Nov of last year (so half a year ago) this was a $4.75 stock. As of this writing it is up ~200% in those six months and up 63% in the last three weeks. Having said all of that, this was once a $50 stock, so back in Nov it was down 90% from those levels. Talk about choosing a time-frame to judge stock performance, right?...

Let's turn to an isolated IV30™ chart over one-year, below.

We can see from the blue "E" icon that earnings were recently released, and we can see from the chart above that the equity market liked the results. What I note is first the vol crush after earnings (which is normal), but then we can see this second leg down in vol, or in English, the red curve goes down, then stops for a day, and then continues to plummet. Putting numbers to it, IV30™ dropped to 65.87% on close after earnings were reported (BMO). But with the IV30™ now trading at 46.91%, the vol has dropped nearly 30% after the earnings vol crush as the stock has continued its rise.

Another interesting vol phenomenon is taking place in the vol diff between expiries. Let's turn to the Skew tab, below.

We can see that May vol is priced well above Jun vol, which is a little odd given that earnings have been out (and digested) for so long. My best guess is that the stock appreciation of late has left that front month gamma expensive.

Finally, let's turn to the Options Tab.

Across the top we can see the monthly vols are priced to 56.78% for May and 47.72% for Jun. Again, my best guess is the continued stock appreciation has left the risk in May elevated to the back months even though earnings are over. This will be an interesting one to watch -- is that Jun (or Sep) vol too low given how abruptly the stock has been moving? Kinda feels that way... ya know, or not...

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