Tuesday, November 19, 2013

Infoblox (BLOX) - Volatility Explodes to All-time Highs; Stock Up 200% in a Year but Earnings Reflect Unprecedented Risk

BLOX closed Tuesday trading at $41.95, down 1.9% with IV30™ rising again, this time to multi-year highs. The Symbol Summary is included below.

Provided by Livevol

Infoblox Inc. (Infoblox) is an automated network controller. The Company’s network functions include Internet protocol (IP) address management, device configuration, compliance, network discovery, policy implementation, security and monitoring.

I found this stock using a real-time custom scan. This one hunts for elevated vols.  I note that BLOX has earnings due out on 11-26-2013 AMC, and while this is probably a name you're not familiar with (I wasn't), this is a compelling stock and volatility story set up for earnings.

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

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated to its own annual history (at least in the 80th percentile). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), and I want a minimum vol level so I don't pick up any boring ETF’s (or whatever). The stock price requirement helps me identify names that have enough strike prices to trade or spread.

The two-year BLOX 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).

Provided by Livevol

On the stock side we can see a rise starting from 11-29-2012 on a rip roaring move off of earnings taking the stock from $13.95 to $18.07 in a single day, or a 30% one-day rise.  Since then, the stock has risen as high as $48.97 and still sits 200% higher at the current level of $41.95.  In that time, the firm has gone from a kinda quiet small cap to a firm now worth nearly $2.2 billion.  Well done management...

But, this is more than a stock story -- much more.  Let's turn to the two year IV30™ chart in isolation, below.

Provided by Livevol

Check out the recent rise.  Yes it's due to earnings, and yes the movement is similar to prior earnings dates (the blue "E" icons represent earnings releases), but the 86.88% level it closed at on Tuesday is way into multi-year (and all-time) high territory.  In fact, the peak prior to this run was 83.30% and that was a single day. 

Since earnings aren't due out for about a week, it's a distinct possibility if not probability that the implied will continue to rise into that event.  90%+ implied is not impossible.  This is turning into a compelling vol story in a stock that has totally transformed itself in terms of valuation.

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

Provided by Livevol

Across the top we can see the monthly vols are priced to 86.88% for Dec and 73.49% for Jan, so the vol reflects the risk in the earnings release.  I'd keep an eye on this one -- both the price and the risk.

This is trade analysis, not a recommendation.

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