Thursday, December 5, 2013

Microsoft (MSFT) - Volatility Ripping; CEO Questions; and Stock Performance that May Surprise You...

MSFT is trading $37.82, down 2.9% with IV30™ up 13.4%. The LIVEVOL® Pro Summary is included below.

Provided by Livevol

Microsoft Corporation is engaged in developing, licensing and supporting a range of software products and services. The Company operates in five segments: Windows & Windows Live Division (Windows Division), Server and Tools, Online Services Division (OSD), Microsoft Business Division (MBD), and Entertainment and Devices Division (EDD).

This is both a stock and volatility note -- both of which were eye opening to me. I found MSFT using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20™ LTE 10
HV180™ - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 60

The MSFT Charts Tab (two-years) 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 MSFT has been ripping over the last two-years, up more than 40% in that time frame..  I do note a nasty gap down off of earnings in the summer (the blue "E" icons represent earnings dates).  I also note that the stock was just at multi-year highs.

So how has MSFT performed relative to the market and some other big names?  Let's look at a one-year stock chart, below:

SPY: Yellow
GOOG: Green
AAPL: Blue

Provided by Livevol

So MSFT has outperformed the index and AAPL, but GOOG is the biggest winner of this bunch.

But, there is also a volatility story here, and it's not trivial.  Let's turn to the two-year IV30™ chart in isolation,  below.

Provided by Livevol

Note that the current level for MSFT is an annual high and right on a multi-year high. For the last two years, the winter earnings release has been on 1-19-2012 and 1-24-2013.  The Jan 2013 earnings date followed a release on 10-18-2012.  this year MSFT released earnings on 10-24-2013.  So, in English, MSFT likely has earnings due out in Jan '14, but the volatility is behaving like earnings are due out any day.

So what's going on?  Well, there is a CEO hole that needs to be filled as Steve Ballmer (current MSFT CEO) is stepping down / retiring).  There was some speculation that Alan Mulally (Ford's CEO) would be the new top dog, but then this came out via AP today:

LOS ANGELES (AP) -- Microsoft shares fell 3 percent Thursday after Ford CEO Alan Mulally said that there is "no change in my plan" to stay with the automaker through the end of next year, dampening some investors' hopes he would take the top job at the software giant soon.

The stock's downturn came despite Mulally's comments on CNBC being no different than what Ford has been saying for months.

The market's reaction indicates investors were hoping the 68-year-old would in fact replace CEO Steve Ballmer, who is set to retire by August at the latest.

"It's clear that the market is hoping that Mulally is the lead candidate," said Morningstar analyst Norman Young.

Source: AP via Yahoo! Finance; Microsoft slumps after Mulally repeats 'no change'

So we have a firm that is up nearly $100 billion in market cap, near decade highs in stock price that can't seem to find a CEO.. OK, that was an overstatement, but you know what I mean...  By the way, for the Ballmer haters out there, look back at the stock chart comparison -- outperformed S&P500 and AAPL.  Not too shabby no?...

Finally, let's turn to the Options Tab.

Provided by Livevol

Here's the weird part... Across the top we can see that Dec vol is priced to 29.04% while Jan vol is priced to 26.24%.  But... Jan'14 should have earnings, right?...  Keep an eye on MSFT and the volatility.  This is no sleeping giant right now.

This is trade analysis, not a recommendation.

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