Wednesday, June 5, 2013

H&R Block (HRB) - Vol Breaches Annual High Well Ahead of Earnings; What's Coming?

HRB is trading $28.45, down 1.2% with IV30™ up 5.0%. The LIVEVOL® Pro Summary is below.


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H&R Block, Inc. (H&R Block) has subsidiaries that provide tax preparation and banking services. The Company's Tax Services segment provides assisted income tax return preparation, digital tax solutions and other services and products related to income tax return preparation to the general public primarily in the United States, and also in Canada and Australia.

This is a vol note, specifically an elevated vol note. And yes, I know that HRB has earnings due out in a week from today -- but this is still worth the analysis -- I'll show you why.

Let's start with the Charts Tab (one-year) is 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 really nice price appreciation Y-O-Y, with the stock rising from $15.53 (so nearly a double in a year) and still paying a nice little divi. We can also see that on the last earnings release (the blue "E" icon) that the stock popped on the news. Good for HRB shareholders and HRB management.

But this is a vol note, and an interesting one. Let's take a look at the one-year IV30™ chart, below.

We can see where the vol peaked for the prior four earnings cycles. Now look at the vol trend of late. With still a week to go before the release, the implied is absolutely exploding. On 5-15-2013 (so, three weeks ago), IV30™ was priced at 34.99%. Today we see a 48.28% level or a 38% rise. The 52 wk range in IV30™ is [16.60%, 46.00%], so we're obviously well into annual high territory. As earnings approaches, the implied should continue to rise and I wouldn't be surprised to see a level well over 50% ahead of the earnings release.

In English, the option market reflects more risk in HRB now than it has in a year and that risk will quite possibly continue to rise.

Finally, let's turn to the Options Tab.

We can see Jun vol is priced to 53.36% and Jul is priced to 42.95%.  That vol diff is due to earnings -- my focus is (and will be) the implied up to earnings.

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