Wednesday, June 26, 2013

Research in Motion (BBRY) - UPDATE: Earnings Vol Falls Again; What's Going on With BBRY Earnings? Now Goldie Sees it too...

BBRY is trading $14.83, up 1.9% with IV30™ down 6.0%. The LIVEVOL® Pro Summary is below.

This is a follow up post to the article I wrote yesterday. It's all about earnings and earnings vol and what the heck is going on. You can read the prior post (which I do suggest), by clicking on the title below:
Research in Motion (BBRY) - Earnings Approach, But is Vol Too Low? Is Obsolescence Still a Possibility?

Here are the high points (I guess that implies there were low points?)... Anyway...

1. The above note surrounded a curiously low vol given the event about to take place on 6-28-2013 BMO (i.e. earnings).
2. For the prior three earnings releases the IV30™ hit 95.51%, 92.44% and 95.90% respectively for Sep-2012, Dec-2012 and Mar-2013.

As of yesterday, the BBRY Symbol Summary looked like this (below):

Note that the implied had risen 6.1 vol points and seemed about ready to make its climb to the elevated level  of prior earnings releases -- albeit a little slow to the come.  But then, today happened. Check that Symbol Summary at the very top, the implied is now down 5.1 vol points (down to 78.66%).  That puts IV30™ exactly in the 50th percentile -- so, in English, the implied is "average" for the year, but earnings are not an average time --not even close.

Let's take a look at the IV30™ chart over one-year in isolation, below.

We can clearly see the prior spikes into earnings (the blue "E" icon represents an earnings release date).  Look at the far right hand side -- that's the dip today. Normally I have pretty good grip on what's going on with vol (or so you would hope), but I have to say, I am confounded by this vol level.  I still believe there is a non-trivial (i.e. non-zero) chance that BBRY goes away in a year (or whatever) -- I mean, BBRY v10 better work.

In any case, this is a firm that once dominated the market, now doesn't, was trading dangerously close to penny stock status (in stock price not in market cap) and now we are about to see the future unfold.  That is not a low risk event.

Also fascinating is the Skew.  Check out the Skew Tab, below.

I've included weeklies and monthlies.  Ultimately, the point is, there is now skew.  Vol is flat -- which is not normal.  The upside is priced the same as the downside which is actually bullish.  To read more about skew, why it exists and what it means, you can go here:
Understanding Option Skew -- What it is and Why it Exists

It turns out goldie (GS) has latched onto this story and put out a note to customers to purchase the weekly straddles into earnings -- they too see this vol as uniquely low.  I saw it first!  Just kidding... Well, no I'm not...

I'm not sure the vol is a purchase, and actually, I couldn't say I was even if I was b/c this isn't advice -- but, I have to say, it has been a while since I have been so confused by what the option market reflects into an earnings release.

This is trade analysis, not a recommendation.

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