Ivanhoe Mines (IVN) - Stock and Vol Pop Right Now, Upside Skew Explodes to "Takeover" Like Levels

IVN is trading $18.98, up small with IV30™ up 9.7%. The LIVEVOL® Pro Summary is below.



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Ivanhoe Mines Ltd. (IVN) is an international mineral exploration and development company. The Company’s principal mineral resource property is the Oyu Tolgoi Project, located in Mongolia.

This another order flow note with some awesome looking skew to go with it. First, let's look at a bit of recent history. On 12-13-2011, IVN dropped 20% (ish) on news that Rio Tinto would consider raising its stake in the firm but not a takeover bid. I got that news from an AP article via Yahoo! Finance: K12, Ivanhoe, Urban Outfitters are big movers. We can see the stock move relative to the rest of the past 6 months in the Chart at the end of this article.

Let's start wit the order flow today. IVN has traded over 30,000 contracts on total daily average option volume of just 9,681. Calls have traded on a 7.7:1 ratio to puts with the Jan 21 calls trading over 15,500 times. Those Jan calls like like substantially purchases. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the Jan 21 calls are mostly opening (compare OI to trade size). We can also see that the Jan 22 calls show a large OI of 14,839. I believe that existing interest is short based on some action on 12-7-2011, where OI rose after a 1,600 lot traded @ $3.20 in a buy-write on a $3.20 x $3.40 market.



The Skew Tab snap (below) illustrates the vols by strike by month.



Here's where it gets interesting. The upside skew in IVN in Jan is super bid. Dare I say, super duper. Hmm, super duper reminds of Superbowl XIX -- Niners vs Dolphins; Niners held the high flying Dan Marino led Dolphins and receivers Mark Clayton and Mark "super" Duper down... Anybody?... No?...

I digress. The upside skew is bid, extraordinarily so in fact. That upside bend has been developing over the last month after starting out quite flat. I've included the skew for IVN as of 12-23-2011 (when Jan and Feb were also the front two months).



We can see how flat that skew "used to be." In fact, as I'm writing this article, IVN has popped an additional $0.40 (ish). The tick chart is included below.



Check out that pop right now! This feels like takeover rumor mania -- bid upside skew and a popping stock midday.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



We can see the abrupt drop on 12-13-2011, discussed above. IVN stock saw another flurry of selling in early Aug dropping for ~$26 to a teenager by mid/late Aug. On the vol side, we can see that even with the pop today, the implied is still trading well below the long-term historical realized vol. Let's see where this upside move and rumor-like order flow and skew lead.

This is trade analysis, not a recommendation.

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HCA Holdings (HCA) - Large Call Buyer is Back Pre-Earnings; OCC OI Error?

HCA is trading $23.57, up 1.1% with IV30™ up 9.5%. The LIVEVOL® Pro Summary is below.



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HCA Holdings, Inc (HCA) is a non-governmental hospital operator in the United States and an integrated provider of health care and related services.

This is an order flow note and an apparent "mistake" from the OCC on the reported OI. Let's start simple and move to the "error" in a bit. HCA has traded over 15,000 contracts today on total daily average option volume of just 3,294. Calls have traded on an 11.8:1 ratio to puts with the action in the Feb 22.5 calls. Nearly 14,000 of those Feb 22.5's have traded today. The color I got was customer buying outright. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls already show an existing OI of 14,393. Looking to the level II data from Livevol® Pro, we can see that OI jumped from ~800 to the current level today. So, that means that ~13,000 of those calls (at least) traded yesterday. Here's the error -- there were not trades yesterday in that line of that size (or in aggregate). It looks like the trade was put up yesterday, then perhaps cancelled or busted later. But, nonetheless, the OI showed the change. Today, the trader seems to have finally gotten the trade on successfully. This is an unusual phenomenon where the normally pristine OI numbers reported by the OCC are in fact misleading.

In any case, the actual OI of about 14,000 is quite large for this company -- and note that earnings are due out in the Feb options cycle. This feels like a spec bet on earnings, perhaps.



The Skew Tab snap (below) illustrates the vols by strike by month.



We can see the vol moves up to the shorter expiries monotonically. The rather large vol diff between Feb and Mar is likely a reflection of an earnings "event" in early Feb. All three of the front expiries show a normal(ish) skew shape.

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



Note on the left side of the stock portion, the gap down in stock price of the earnings release in Jul. The stock was trading ~$35 and less than a month later it was a teenager -- so ~50% drop in a month. It's interesting to note that the implied tends to trade below the short-term historical realized vol (HV20). In English, the short-term (future) risk reflected by the implied vol tends to be lower than the actual stock movement (in the short-term). The vega buyer today in Feb may be a bet that the trend continues and rather significantly off of an earnings move.

This is trade analysis, not a recommendation.

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Williams-Sonoma (WSM) - Stock Plummets But Options Reflect Low Risk, Puts Sold

WSM is trading $34.16, down 12.16% with IV30™ down 15.9%. The LIVEVOL® Pro Summary is below.



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Williams-Sonoma, Inc. is a specialty retailer of products for the home. The Company has two segments: direct-to-customer and retail.

The stock is down hard to day on some outlook. I've included a snippet from a MarketWatch article, below:

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CHICAGO (MarketWatch) -- Williams-Sonoma Inc. shares fell 13% Thursday after the home-furnishing retailer trimmed its fourth-quarter and full-year forecasts, due to higher marketing costs over the holiday season.

Source: MarketWatch via Yahoo!Finance Williams-Sonoma plunges 13% on outlook, written by David B. Wilkerson.
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It's interesting that the vol is down. That type of vol behavior is normally a reflection of a news event that was expected and has now happened (like an earnings release). In English, it feels like the announcement (good or bad) was expected to occur. Before we look at some vol comps 'n stuff 'n stuff, let's turn to the order flow and see how it has been the impetus for the vol decline.

The company has traded over 13,500 contracts on total daily average option volume of just 766. Puts have traded on a 4.5:1 ratio to calls. The action has been in the Feb 33 puts, were over 5,100 have traded. Those look like sales (substantially) as do the Feb 32 puts which have traded over 2,000 times.  Traders are selling vol in WSM.  The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the puts in Feb are mostly opening (compare OI to trade size). The largest OI  that I see in the near the money options in the front three months is the Jan 38 calls (5,064), so the volume in the Feb 33 puts is quite large for this company.



The Skew Tab snap (below) illustrates the vols by strike by month.



One of the more interesting skews I've seen in a while. First, we can see that the front ATM vol is in between the second and third expiries, which in and of itself is not note worthy. But, the shape of the Jan skew is the opposite of "normal." The upside is bid, super bid actually, with the OTM calls more expensive than the strikes below them all the way down to the ATM.  The second and third expiries, however, show a normal shaped skew, with OTM put vol more expensive than the calls (and ATM).

In English, the front month reflects upside potential over downside risk. The second month doesn't, but the order flow has been to sell that downside -- in a sense, trading as though the second month should be priced like the first, with downside vol depressed. Tricky...

To read about skew, why it exists and what "normal" means, you can go here:
Understanding Option Skew

Finally, the Charts Tab (one year) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



This Chart is interesting for a couple of reasons.

1. The stock has seen a lower price (substantially lower) in the relatively near-term. On 10-4-2011, the stock hit the $28.53 level (intraday). So what?  Well, with bad news today, the order flow has been to sell the downside and to price the near-term upside more expensively yet, again, the stock has been lower very recently.  Weird...

2. The vol dip today is quite notable. Why? Because the current IV30™ level is right on top of an annual low (which is 29.04%). The IV30™  is at (or around) the 5 percentile level (annual).

It's astonishing to me how the market is digesting this bad news for WSM. It's abrupt with respect to stock, but the vol behavior reflects significantly lessened risk moving forward - very much like a full earnings report.  Very cool and kinda weird.

This is trade analysis, not a recommendation.

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Ciena (CIEN) - Depressed Vol

CIEN is trading $14.34, up small with IV30™ up 0.7%. The LIVEVOL® Pro Summary is below.



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Ciena Corporation (Ciena) is a provider of communications networking equipment, software and services that support the transport, switching, aggregation and management of voice, video and data traffic.

I found this stock using a real-time custom scan. This one hunts for low vols.

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 snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.



The goal with this scan is to identify short-term implied vol (IV30™) that is depressed both to the recent stock movement (HV20) and the long term trend in stock movement (HV180). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not purchasing depressed IV30™ relative to HV20 simply because of a large earnings move.

The CIEN 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).



We can see the upside swing that CIEN has been on of late. On the vol side, we can see how depressed the implied is to the two historical realized vol measures. Specifically:

IV30™: 52.22%
HV20™: 65.12%
HV180: 73.87%

The 52 wk range in IV30™ for CIEN is [40.07%, 101.58%], so the current level is the 19th percentile (annual). Or, in English, the current implied is low not just relative to the historical realized vol measures, but also to its own history.

Let’s turn to the Skew Tab.



We can see the vol rises from the short expiries to the longer-term. The next earnings release for CIEN is likely in Mar, so the Apr options have that vol event, while the front two expiries do not.

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



I wrote about this one for TheStreet, so no specific trade analysis here. We can see the monthly vols are priced at 46.62%, 52.62% and 56.67%, respectively for Jan, Feb and Apr. That APR ATM straddle (which as earnings) is priced at ~$3.40 with a 52 wk range in CIEN stock price of [$9.89, $29.24].

This is trade analysis, not a recommendation.

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ReneSola (SOL) - Stock and Vol Explode on Chinese Solar Down 90%

SOL is trading $2.21, up 28.5% with IV30™ up 49.0%. The LIVEVOL® Pro Summary is below.



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ReneSola Ltd. (ReneSola) is a manufacturer of solar wafers and producer of solar power products based in China. The Company possess a global network of suppliers and customers that include some of the global manufacturers of solar cells and modules.

I last wrote about SOL on 11-17-2010. The stock was trading $9.25 and I noted the elevated vol. Yesterday's close was $1.72, so in fourteen months the stock is down 81.4%. Even to today's pop, SOL is down 75.7% since the last post. So, ya know... the elevated risk reflected in the option market was justified... You can read that prior post here:
ReneSola (SOL) - Elevated Vol in Chinese Solar Company

Today's note surrounds the stock and vol pop as well as some order flow.  As far as I can tell, the news driving the stock and vol move is a note out from Deutsche Bank citing positive remarks in the solar sector. I found that one-line teaser from Briefing.com.

The company has traded over 14,000 contracts on total daily average option volume of just 978. All but 429 contracts have been calls, yielding a 32:1 call:put ratio. The action has been in the Feb 2 calls where over 8,200 have traded -- substantially purchases, IMO. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size). When looking down the entire option chain, I don't see any OI larger than 5,100, so this action is very large for SOL.



The Skew Tab snap (below) illustrates the vols by strike by month.



We can see the ATM vols for the front three months are monotonically increasing to the shorter expiry. More interesting to me is the upside skew in Feb vs Apr. Essentially the Feb calls show a rising vol from the ATM while Apr shows a dropping vol. The vol diff between the Feb and Apr 3 strike calls is nearly 25 vol points.

Looking back to the Options tab (above), we can see over 1,100 Feb 3 calls have traded on zero OI. Those look long to me, but it's a touch ambiguous on some trades. Given the circumstantial evidence (skew rising), it feels like long interest.

Finally, the Charts Tab (two years) is 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 highs a little more than a year ago when this stock was a teenager and then the rather cataclysmic 90% drop. On the vol side, we can see the IV30™ peak on 10-20-2011 to 164.91%, then abrupt drop. Today's move has pushed the implied back over 124% (as I'm writing this the vol is rising).

This is trade analysis, not a recommendation.

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Guess? (GES) - Elevated Front to Back Vol, Depressed Implied to Recent Stock Stagnation

GES is trading $29.51, down 3.9% with IV30™ up 3.9% as of ~11:15am EST. The LIVEVOL® Pro Summary is below.



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Guess?, Inc. (GUESS?), designs, markets, distributes and licenses apparel and accessories for men, women and children.

This is a vol note with two interesting phenomenon. One surrounds month-to-month vols, the other surrounds overall vol levels and comps. Let’s stat with the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



The first phenomenon relates to overall vol and vol comps. We can see in the stock chart that GES underlying has essentially stood still for the last few weeks. That “stagnant” behavior has dropped HV20 to 26.16%. The long-term trend (HV180) is 52.63% which is twice the HV20. In English, the annualized realized vol over the last 20 trading days is 26.16% while that same measure over 180 trading days is 52.63%. Tricky…

While the realized (past) vols are divergent, the implied is right in between. IV30™ is 40.60%. While the implied has been dipping, it hasn’t breached the 20’s as HV20 has. The 52 wk range in IV30™ is [28.49%, 75.21%], so the current level is in the 25th percentile (annual).

While the implied is depressed to it’s own history and the long-term historical realized vol, the month-to-month vols show another story. Let’s turn to the Skew Tab.



We can see the Jan vol is elevated to Feb. That vol diff is not earnings related, which is to say the next official earnings report should be in Mar (ish). But, as a retailer, GES does release monthly store comps (sometimes). Clearly the option market reflects elevated near-term (future) risk in GES – which is in contradiction to the short-term (past) historical realized movement.

Finally, let’s turn to the Options Tab, for completeness.



I wrote about this one for The Street (OptionsProfits), so no specific trade analysis here. We can see Jan is priced to 47.29% while Feb is priced to 39.97% -- both of which are depressed to the HV180 and elevated to the HV20. It make sense that the option market reflects higher vol than the recent past, the question is, when does that "implied" move happen? If it's in less than 1.5 weeks, then Jan is a purchase. If it's in less than ~6 weeks, than Feb is a purchase. If it's after Jan expo but before Feb expo, then a calendar is one approach.

This is trade analysis, not a recommendation.

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WebMD Health Corp (WBMD) - Stock Collapse on Repeated Warnings, Options Reflect Upside Potential

WBMD is trading $26.65, down 27.4% with IV30™ up 24.1%. The LIVEVOL® Pro Summary is below.



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WebMD Health Corp. (WebMD) is a provider of health information services to consumers, physicians and other healthcare professionals, employers and health plans through its public and private online portals, mobile platforms and health-focused publications.

Let's start with the news that has the stock losing more than a quarter of its value today. Here's a snippet from The Motley Fool.

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Today was actually a double whammy. First, it was announced that WebMD CEO Wayne Gattinella had resigned and that he'd be replaced in the interim by the company's CFO. Secondly, and most importantly, after failing to find what the company deemed an adequate bidder, WebMD took down the "for sale" sign in its front yard. WebMD will remain an independent company, but warned that slower ad spending from drugmakers and increased competition could cause near-term shortfalls in sales and earnings.

Source: Fool.com via Yahoo! Finance WebMD Shares Imploded: What You Need to Know, written by Sean Williams.
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Yikes... Let's turn to the Charts Tab (6 months) ibelow. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



What's troubling is not just the news today (or double news), but also the tendency for the company to gap down with fairly high frequency. On 7-18-2011, the stock dropped 30% from $46.48 to $32.48. The news from that drop was simply a reduction in 2011 forecast for sales and profits -- again citing declining ad revenue. I sourced that from a Bloomberg article (via Yahoo! finance). You can read the full article here: WebMD Shares Post Biggest Drop Ever After Company Reduces 2011 Forecast, written by Lisa Rapaport and Zachary Tracer.

Then, on 11-3-2011, the stock dropped 7.7% from $33.75 to $31.15 on a planned earnings release. The news today is again warning of falling ad revenue -- along with some other resulting news... Like no bidders (or no bids that the company will entertain).

On the vol side, what's fascinating about this company is that the implied tends to trade below the long-term historical realized vol. In English, the short term options are priced with lower volatility than the long-term realized stock movement. When I examined the longer-term implied vol (IV180™), that same phenomenon exists. I've included a two year chart (just vols) of HV180 (pink) to the IV180 (orange), below.



Check out how the long-term implied used to trade above the long-term realized vol. That's the option market reflecting greater long term risk than the stock had realized in the past. But, after the cataclysm that was the pre-announcement, the reverse occurred. The option market reflected (and still reflects) lower implied future risk while the actual realized vol has been increasing. Pretty weird... But, it gets weirder...

Let's turn to the Skew Tab.



We can see that the skew in WBMD reflects more upside risk than downside. When I looked back at the historical skew in LVP, that's kinda the deal with this stock. That is, even with the incredibly bad news and stock returns to the downside, the skew reflects more upside potential than downside risk.  That's likely a reflection of the takeover / sales process... which has failed...

Finally, let's turn to the Options Tab for completeness.



We can see the monthly vols are priced to 76.22%, 62.36%, 57.75% and 52.95% for Jan, Feb, Mar and Jun. Again, the longer-term implied is depressed relative to the short-term vol. We can also see the volume in the Jan 30 calls (the green number) -- that looks like substantially purchases on almost nonexistent OI.

This is trade analysis, not a recommendation.

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Perfect World (PWRD) - Is Chinese Small Cap Impropriety a Mirage or Reality? Does it Even Matter?

PWRD is trading $9.89, up 12.3% with IV30™ down 18.7% as of ~10:15am EST. The LIVEVOL® Pro Summary is below.



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Perfect World Co., Ltd. (Perfect World) is an online game developer and operator in People’s Republic of China. Perfect World develops online games based on its game engines and game development platforms.

The stock pop today is actually quite the story – which is to say, it’s off of a significant drop yesterday. Let’s start with the news that pushed the stock down $12.00 down to $8.81 (26.6%). This is a snippet from The Motley Fool:

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What: Shares of Chinese online game developer Perfect World were hoping for a do-over on Monday after plunging as much as 30% in intraday trading as rumors about fraud made the rounds.

So what: The plunge in Perfect World's shares is a perfect example of just how skittish investors are about small-cap Chinese stocks after some high-profile frauds were uncovered in the group. The "news" behind Perfect World's swoon hasn't been widely covered, but it appears that investors started hammering the sell button after a blog on Tianya -- a Chinese social-networking site -- alleged that there was an investigation going on at Perfect World.

The latest scuttlebutt notes that the blog post has been removed from Tianya and the company -- through a Wall Street research analyst -- has refuted the claims.
Source: Perfect World Shares Dropped: What You Need to Know, written by Matt Koppenheffer
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Ah, the world of fraud and Chinese public companies. I recently posted an article on the future of China at large and in the past have asked a rather abrupt but, IMHO, fair question. Is China the largest fraud epidemic in the history of the world? Why China Will Collapse By This Summer

In fairness to PWRD, the blog post purporting impropriety could be nothing more than.. well nothing more than nothing...

Let’s turn to the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



Starting from 6 months ago, we can see the stock has dropped from the low 20’s, to single digits. The action yesterday and then semi-rebound today have seen the implied vol spike and then drop.

Let’s turn to the Skew Tab to examine the month-to-month and line-by-line vols.



Isolating the front two months, we can see that Jan lies above Feb, and the shapes are similar with a fairly large vol diff opening up the 9 strike (and below). Mar skew is a different animal with the 12 strike bid versus all surrounding strikes. In fact, the 12 strike calls are priced to higher vol than the 8 strike puts… Ok?...

The Feb/Mar 12 call spread sells ~14 vol points higher than it purchases (for example).

Finally, let’s turn to the Options Tab, for completeness.



We can see the monthly vols are priced to 85.60%, 79.47% and 80.73% for Jan, Feb and Mar, respectively. Of course, with the funky skew in Mar, the weighted average vol numbers don’t really tell the whole story.

I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. I will say that at this point it’s just absurdity in these stocks. Even if PWRD is doing nothing wrong – business as usual is still so risky due to stuff like that blog post, that any "certainty" is more likely a mirage than a reality. Ya know, or not?...

This is trade analysis, not a recommendation.

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