Friday, January 3, 2014

Navistar (NAV) - Volatility Breaches Annual Lows; Option Market: Stock Stays Still for Next Two Weeks. Wanna Bet?

NAV closed Friday trading at $37.75, up 1.4% with IV30™ down 2.6%. The LIVEVOL® Pro Summary is included below.

Provided by Livevol

Navistar International Corporation (NIC) is a holding company, whose principal operating subsidiaries are Navistar, Inc. and Navistar Financial Corporation (NFC).

This is a quick note on a stock with implied volatility collapsing to a level almost not seen in a year.  I found this stock using a real-time custom scan.

Custom Scan Details
Stock Price GTE $7
IV30™ - HV20™ LTE -8 GTE -40
HV180™ - IV30™ GTE 7
Average Option Volume GTE 1,200
Industry != Bio-tech
Days After Earnings GTE 32

The NAV 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 see essentially two stories:

1. The two-year return is negative, with the stock closing at $38.77 two-year ago.
2. The one-year return is ~72%, with the stock up from ~$22.

So... you tell me, has it been a good ROI for equity holders....

I'll focus on both time periods, of course, focusing on the volatility.  Let's turn to the two-year IV30™ chart in isolation, below.

Provided by Livevol

Over the last year, NAV IV30™ is trading in the 2nd percentile, after just breaching a new annual low a few trading days ago.  Looking back two years (which is what this chart represents), we can see the implied reached as high as 98.76% and as low as 30.16% all within just four months.

My take today is pretty simple.  This stock can gap - it's up 72% in a year, the implied can go every which way, and the option market reflects less risk now than it has in the last year (basically).  Hmm....

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

Provided by Livevol

Across the top we can see that Jan and Feb vol are priced nearly identically to ~35.5%.  Look at that $38 strike straddle in Jan; it's worth ~$2.  Option expiry is Friday Jan 17... Here's the question: Will NAV be in [$36, $40] in the next two weeks?...

I guess we'll see... For now, the stock does certainly seem to have hit a quiet equilibrium....

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 disclaims 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