Thursday, September 5, 2013

VeriFone (PAY) - Volatility Breaches Annual High; Earnings Out in 2-Hours, Will Pattern Continue?

PAY is trading $20.36, up 0.4% with IV30™ up 1.4%. The LIVEVOL® Pro Summary is below.

VeriFone Systems, Inc. (VeriFone), formerly VeriFone Holdings, Inc., is a holding company for VeriFone, Inc. The Company is engaged in the secure electronic payment solutions. It provides solutions, and services for the financial, retail, hospitality, petroleum, transportation, government, and healthcare vertical markets. Its system solutions consist of point of sale (POS) electronic payment devices that run its and third-party operating systems, security and encryption software, and certified payment software, as well as other third-party value-added applications.

I found this stock using a real-time custom scan. This one hunts for elevated vols. ow PAY has earnings due out in two hours -- but the implied is at multi-year highs, and I have sneaking suspicion why.

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

The two-year PAY 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 I have highlighted several gaps in the price, noted with yellow circles. Most of those moves were in reaction to an earnings announcement. So, in English, this stock seems to react rather abruptly to earnings releases.

Let's turn to an isolated two-year IV30™ chart, below

Check out the level of the implied right ahead of earnings in a couple of hours.  That is a multi-year high.  My sneaking suspicion is pretty simple-minded -- the stock has whip-sawed off of previous earnings releases and the option market is reflecting that risk in today's announcement.

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

In the front month we can see that ATM straddle is priced to ~$2.70.  Now that's not just the earnings release, as there are a couple of weeks of trading after the news, but the point is, we're looking at 82%+ volatility into the news.  Now the real question is, will PAY gap again, or is this fool's gold volatility ready for a huge vol crush?

I'll tell you in two-hours.

This is trade analysis, not a recommendation.

Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

No comments:

Post a Comment