Friday, September 6, 2013

Vipshop (VIPS) - Chinese ADR Shows Volatility at All-time Low; Stock up 1000%... What's the Disconnect?

VIPS closed at $42.94, up 2.0% with IV30™ down 2.0%. The LIVEVOL® Pro Summary is below.

Vipshop Holdings Limited (Vipshop Holdings) is a holding company. Vipshop Holdings conducts its business through its subsidiaries and consolidated affiliated entity in the People's Republic of China. The Company is engaged in the online discount retailer for various brands.

I found this stock using a real-time custom scan. This one hunts for depressed vols. I note that VIPS is in the “0” (zero) percentile, so it is in fact at an annual low. The fact is, this firm has only had traded options since Apr of this year, so this volatility level is in fact an all-time low (for whatever that’s worth).

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 20
IV30™ Percentile LTE 10
Average Option Volume GTE 1,200

The two-year VIPS 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 price rise from ~$4 to now ~$43. So, ya know, up a lot-a lot. We can also see an all-time high in equity price ($50.43) reached right around the last earnings date in the middle of August. This is where the story begins… note the stock drop since earnings of ~ $10.

Now let’s turn to the IV30™ chart in isolation since the firm began trading options.

We can see a closing peak of 106.31% and although there was another (lower) peak at the end of Jul, the implied has collapsed since then. So, we have a Chinese ADR that is up ~ 1000% in two-years, down ~ 20% from its last earnings release and an all-time high with the implied now dipping to an all-time low. What? This one I really don’t get…

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

Across the top we can see the monthly vols are priced to 64.30%, 65.21% and 70.25% for Sep, Oct and Nov, respectively. That monotonic increase in volatility makes sense, but even that scale is quite low relative to a stock up 1000% in two-years and down 20% in four weeks off of earnings.

This is trade analysis, not a recommendation.

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1 comment:

  1. Hi,

    I have a position in the company. I'm not an options player so I don't exactly understand what you are trying to say? As in, does it forebode lower prices from here or higher.