Friday, August 16, 2013

ICICI Bank (IBN) - Stock Craters as Volatility Spikes; Risk at Annual Highs per Option Market

IBN is trading $29.67, down 5.72% with IV30™ up 11.3%. The LIVEVOL® Pro Summary is below.

ICICI Bank Limited (the Bank) is a banking company. The Bank, together with its subsidiaries, joint ventures and associates, is a diversified financial services group providing a range of banking and financial services, including commercial banking, retail banking, project and corporate finance, working capital finance, insurance, venture capital and private equity, investment banking, broking and treasury products and services.

I found this stock using a real-time custom scan. This one hunts for elevated vols. I note that IBN is the top result – breaching an annual high in IV30™ and wait ‘til you see the stock chart.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200

The one-year IBN 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).

Y-O-Y the stock has come down from $34.44, but that’s not the story. Check out the decline since May. The stock peaked at $47.68 and in just four months has come crumbling down nearly 40%. And this is a $17B company – not some little known ADR.

If we look at the path the stock has taken in that four month period we can see several gaps down and yet again today we see a 5.7% drop.

Of course, this is a volatility note, so let’s turn to the one year IV30™ chart in isolation, below.

Check out the move since the middle of May. The implied has spiked 55% in coordination with the ~40% stock drop. As of today, the options reflect more risk in this name than at any point in the last year. Is this earnings related? Actually not… the firm released earnings on 8-2-13, this is much more than a surprise earnings release, it’s a systematic decline in enterprise value and a corresponding systematic increase in risk as reflected by the option market.

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

Across the top we can see that Sep vol is priced to 39.36% while Dec is priced pretty similarly at 38.38%. Whatever the case, I kinda get the feeling that IBN hasn’t exactly found a point of equilibrium yet. An annual high in vol makes sense…

This is trade analysis, not a recommendation.

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