Monday, July 22, 2013

Skechers USA (SKX) - Stock Rips, Earnings Approach, But the Volatility Disappeared

SKX is trading $27.02, up 1.1% with IV30™ down 2.2%. The LIVEVOL® Pro Summary is below.

Skechers U.S.A., Inc. (Skechers) designs and markets Skechers-branded lifestyle footwear for men, women and children, and performance footwear for men and women under several lines. In addition to Skechers-branded lines, the Company also offers a branded junior line.

I found this stock using a real-time custom scan I built. This one hunts for calendar spreads between the front two monthly expiries. But the company has earnings due out on 7-24-2013 (in two days), so of course there is a calendar volatility difference. That’s not the issue… It’s level of the vol – how low it is, that is fascinating.

The two-year SKX 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 sort of a sleepy first year (remember that for later), but recently an explosion from $15.32 (11-14-2013) to now $27. That represents more than a 75% rise in eight months.

But this is a vol story – kind of a weird one… So let’s turn to the two-year IV30™ chart in isolation below.

Keep in mind that SKX has earnings due out in two days, so the vol should be elevated. But, in fact the IV30™ is in the 39th percentile on an annual scale. So, in English, the vol is actually depressed. I have highlighted with the little yellow circles the IV30™ at the time of earnings for the last seven cycles. Then I’ve drawn that horizontal line to represent the current level. We can see pretty clearly how depressed this earnings vol is relative the last seven quarters.

Then recall what we noticed about the stock price. This was actually a “sleepy” stock for a lot of that prior time period and only recently has boomed to a 75% rise. So, the stock is moving abruptly higher as the vol has hit an eight quarter earnings low. Hmmm…

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

Across the top we can see that the monthly vols are price to 46.28% for Aug and 38.80% for Sep. Considering the annual high in IV30™ is 68.06%, that Aug number feels low… right?... Or, ya know, not…

This is trade analysis, not a recommendation.

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