Wednesday, May 8, 2013

Fusion-io (FIO) -Stock Gaps Down; Vol Explodes as CEO and CMO Exit "Immediately"… But Keep Your Eye on that Vol

FIO is trading $14.09, down 21.72% with IV30™ up 36.4%. The LIVEVOL® Pro Summary is below.


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Fusion-io Inc (Fusion) is a provider of datacenter solutions that accelerate databases, virtualization, cloud computing, big data, and the applications that help drive business from the smallest e-tailers to some of the largest data centers, social media leaders, and Fortune Global 500 businesses.

I found this stock using a real-time custom scan. This one hunts for vol gainers on the day. This is an interesting one b/c the stock has gapped down on what seems to be a total surprise that the founder and CEO has stepped down effective immediately along with the company’s Chief Marketing Officer to “to pursue entrepreneurial investing activities.” But, no, that’s not the most interesting part…

What’s interesting is that with the stock down 22%, and a vol pop of 36%, the IV30™ is still just in the 39th percentile (annual). So this is a “depressed elevated vol” note… Let that roll around on your tongue for a second…

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percent Change GTE 10
Average Option Volume GTE 1,200
IV30™ Change GTE 7

The goal with this scan is to identify names with rising IV30™ that also have a reasonable amount of liquidity in the options (thus the minimum average option volume) and enough strikes to spread and thus a minimum stock price. I also require a minimum vol level in order to avoid any boring ETFs (or whatever).

The one-year FIO 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 an annual high of $32.63 and now a new annual low of below $14 (intra-day) in the span of just seven months. If you check out that blue “E” icon (the most recent one), that’s the last earnings release. The stock rose from ~$15 to ~$20 in the few days surrounding the release. So, the CEO is leaving the firm after a “good” earnings report. So all is well, right?...

But, this is also a vol note, so let’s look to the one-year IV30™ chart, below.

We can see how the IV30™ moves in a hypnotic rhythm to earnings (as do all stocks). But more interesting is that with this incredibly surprising news, the IV30™ has popped, but only to the mid 60% level. And why do I find that weird?... Because either this news is a non-event in the sense that this really is just a CEO jumping on a start-up idea (that likely got funding today or whatever) and the company is doing fine (i.e. this is not a reflection of what’s happening at FIO), so the stock price should be essentially unchanged… Or, this is absolutely a reflection of some “bad stuff” going on at the firm and a 22% drop is just the start of what could be a free fall to even lower new lows. That means the vol is too low.

Or… both of those are wrong and the equity market has priced this news basically perfectly, and the elevated risk (as reflected by rising vol) is appropriately “middle of the road.” I dunno… I feel like the prior rather than the latter…

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

Across the top we can see May vol is priced to 72.87% (up a huge 24.6 vol points today) and Jun is priced to 61.32% (up 14.4 vol points – also huge). Again, this would make sense that the font is more elevated than the back since the news / reality of this change will start to be realized sooner rather than later… or… will it?...

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1 comment:

  1. Interesting article, I like your articles. It will be fascinating to see how things pan out.