Wednesday, July 10, 2013

Caesars Entertainment (CZR) - Volatility Nears Annual Low as Stock Rips and Earnings Approach

CZR is trading $15.42, up 9.1% with IV30™ down 6.0%. The LIVEVOL® Pro Summary is below.

Caesars Entertainment Corporation provides casino entertainment services. Its casino entertainment facilities include land-based casinos, riverboat or dockside casinos, managed casinos, combination greyhound racetrack and casino, combination thoroughbred racetrack and casino, and harness racetrack and casino, hotel and convention space, restaurants, and non-gaming entertainment facilities.

This is a vol note, specifically a depressed vol note on a stock that has been ripping of late. Let's start with 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 the Y-O-Y return is very impressive with the stock closing at $10.31 one-year ago, yielding a ~50% return in 12-months.  I also note that this was a $4.50 stock just eight (ish) months ago.

But, if we look more myopically, we can see an interesting trend. CZR closed at $12.25 on 6-24-2014 and now 17 days later the stock is trading at $15.42 or a 26% rise in about two-weeks.

But this is a vol story as well, so let's look at the one-year IV30™ chart in isolation, below.

We can see the ebbs and flows in the vol into and out of earnings -- all normal stuff.  But what caught my eye is the recent dip in the implied as the stock has been moving abruptly higher.  The current level of the IV30™ is right at an annual low.  Interesting...

The firm does have earnings due out in the Aug expiry, so there is a vol diff month-to-month and since IV30™ is a blended / weighted average, it does reflect a part of that upcoming earnings event.  That makes the low vol even more odd.

Finally, let's turn to the Options Tab for completeness.

Across the top we can see the monthly vols are priced to 57.36% for Jul and 64.04% for Aug.  The 52 wk range in IV30™ for CZR is [61.27%, 121.59%], so even looking at Aug vol -- that seems kinda low for a stock that has moved so much recently and has an earnings release.  Right?  Ya know.. or not... In any case, that Aug (and IV30™) number will rise as we approach that earnings date unless there is some pre-earnings guidance or other unexpected disclosure.

This is trade analysis, not a recommendation.

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