Tuesday, July 2, 2013

Athenahealth (ATHN) - Volatility Gaps Up; More to Come as Earnings Approach

ATHN closed Monday at $85.02, up 0.34% with IV30™ spiking up 23.4%. The LIVEVOL® Pro Summary is below.

athenahealth, Inc. (athenahealth), is a business services company, which provides ongoing billing, clinical-related, and other related services to its customers. The Company provides these services with the use of athenaNet, an Internet-based practice management application.

I found this stock using a real-time custom scan. This one hunts for vol gainers on the day.

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 six-month ATHN 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 a fairly abrupt rise in price from the start of the year through the middle of March from ~$75 to ~$98. During that same time period, we can see the implied dipping (the bottom of the chart – the red line). We’re starting to see the opposite phenomenon now. Check out the recent stock drop in ATHN and the vol pop today.

Let’s look more myopically at the IV30™ in an isolated six-month chart, below.

On 5-22-2013 the IV30™ closed at 28.88%, today it closed at 47.38% or a 64% rise in just over a month. The company has earnings due out on 7-18-2013 (AMC), so the implied vol should continue to rise. The 52 wk range in IV30™ for ATHN is [24.64%, 54.39%]. At this pace, it’s reasonable to assume that ATHN could break an annual high in IV30™ ahead of the approaching earnings report.

Note than on 5-3-2013 the stock gapped down on guidance / earnings. So, there is precedence here for large stock moves off of the earnings release. The IV30™ going into that release was just 41% -- we can see the impact that stock move has had on the implied as we approach this next earnings date.

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

Across the top we can see that Jul is priced 51.58% and Aug is priced to 41.83%. Again, it would not surprise me to see ATHN breach an annual high in IV30™, perhaps even as high as 60% as 7-18-2013 approaches.

This is trade analysis, not a recommendation.

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  1. For a long vol play, how do you choose between Jul and Aug? Jul more closely represents IV30, but has low vega and high theta. Aug has the opposite, but is less representative of IV30.

  2. Thank you for this analysis. As these extremes are reached what are the trading opportunities?