Wednesday, October 16, 2013

Ubiquiti Networks (UBNT) - "[The] Most Important Announcement of the Year." Now This is a Story...

UBNT is trading $39.47, up 4.4% with IV30™ popping 14.1%. The LIVEVOL® Pro Summary is below.

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Ubiquiti Networks, Inc. (Ubiquiti) is a communications technology Company. designs, manufactures and sells broadband wireless solutions worldwide. The Company offers a portfolio of wireless networking products and solutions, including systems, high performance radios, antennas and management tools, designed for wireless networking and other applications in the unlicensed radio frequency (RF) spectrum.

This is a truly fascinating story that I just now picked up on (my bad). The stock has been rocketing and implied volatility has been rising with the price, but it seems to surround this very auspicious announcement which I picked up from theflyonthewall:

Ubiquiti Networks teases 'most important announcement of year'
Ubiquiti Networks plans a vendor presentation at the WISPAPALOOZA conference, scheduled for tomorrow night, where the company will make its "most important announcement of the year," according to the agenda for the event. The broadband conference is hosted by WISPA, the wireless Internet service provider association.

Source: theflyonthewall via Yahoo! Finance

Really... That sounds like fun... The IV30™ has been ripping of late as has the stock, so let's look at a 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 we can see the price appreciation from ~$11 to now ~ $40 in less than a year. That's ~260% rise in a firm that now has a market cap of ~$3.5 billion. So, it's not a tiny no-name firm. But there's a fascinating happening with the volatility as well.

First, let's look at the bottom portion of the chart above. Note how the red curve has been on a tear, rising from ~50% on 9-10-2013 to now over 100%. In English, the option market reflects a double in the share price risk for UBNT in the next 30-days.

But there's more weird stuff with the vol. Let's look at the Skew Tab, below.

We can see that Oct vol (the red curve) is well depressed to Nov vol (the yellow curve). But when I read the news from theflyonthewall, that doesn't really make sense to me. I'll reprise that relevant part:

UbiquitiNetworks plans a vendor presentation at the WISPAPALOOZA conference, scheduled for tomorrow night

So that would be Thursday night, and Oct expiry is Friday night. So there should be a day of trading after the announcement. Now, I know that UBNT has an earnings release on 11-7-2013 (AMC), but who cares?... If this is the "most important announcement of the year," earnings in Nov are completely trumped by the news coming out on Thursday night... right? Or not?...

Anyway, we gotta put this one on a watchlist and look at that vol diff between Oct and Nov. What an interesting volatility story that will play out its final act in two days.

This is trade analysis, not a recommendation.

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