United Therapeutics (UTHR) - Vol Elevates to Annual Highs; Risk into Earnings Rises

UTHR is trading $56.41, up 0.5% with IV30™ up 7.0%. The LIVEVOL® Pro Summary is below.



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United Therapeutics Corporation is a biotechnology company focused on the development and commercialization of products to address the unmet medical needs of patients with chronic and life-threatening conditions.

This is a vol note -- while earnings are approaching we expect to see vol rise, but this one really caught my eye. Let's start with the Charts Tab (six months), 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 an impressive rise over the last six months from the low $40's to now over $56 and on a rather steady trajectory.

On the vol side, we see the story. The implied has been rising exponentially as earnings approach (end of Oct / early Nov). The level is easily a six-month high and is on the brink of becoming an annual high. The 52 wk range in IV30™ is [27.38%, 56.64%], putting the current level in the 99th percentile. The last time the implied hit this level was the earnings release a few quarters ago.

Let's turn to the Skew Tab.



We can see a normal skew shape across all three front expiries, with Nov elevated to the other two b/c of he earnings release.

Finally, let's turn to the Options Tab.



Across the top we can see the monthly vols are priced to 36.21% for Oct and 62.25% for Nov. Given that there are still a few more weeks to go before earnings, it's apparent to me that IV30™ will hit an annual high before this event. This is one of a handful of companies I've noted recently where the implied will be breaching annual highs into earnings. Hey, it's October in finance -- risk is here.

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Barnes & Noble (BKS) - Vol Pops But Remains Depressed as Nook News is Good; Solvenecy and New Technology but Low Risk?

BKS is trading $14.80, up 7.2% with IV30™ up 14.1%. The LIVEVOL® Pro Summary is below.



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Barnes & Noble, Inc. (Barnes & Noble) is a bookseller. The Company is a content, commerce and technology company that provides customers access to books, magazines, newspapers and other content across its multi-channel distribution platform.

I found this stock using a custom scan searching for names where IV30™ is up at least 10% on the day. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.



The BKS 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).



On the stock side we can see the enormous pop in late April on this news:

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Microsoft made a $300 million investment in the e-commerce business of Barnes & Noble, propelling the book retailer’s shares up 50% for the day. After the announcement, the B&N market capitalization jumped to $1.2 billion from $800 million pre-announcement.

B&N and Microsoft will form a subsidiary to market e-books and digital devices in the fast-growing market for on-line content. B&N wants to accelerate sales of its NOOK digital reader and its large inventory of electronic copyrights.

Source: Forbes via Yahoo! Finance; Barnes & Noble Shares Skyrocket 50% Post Microsoft eInvestment, written by Susan Kalla.
---

Since that time, however, the stock has headed essentially straight down, going from a closing peak of $20.75 to now under $15.

On the vol side we can see a pretty smooth ride in the implied, until today. BKS IV30™ is up 14% on this news:

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[BKS] moved higher after its CEO said the company is gaining share in Nook subscriptions.

Source: CNBC.com via Yahoo! Finance; Midday Movers: BKS, SIRI, PCS & More, by Rich Fisherman.
---

It's fascinating that the survival of BKS (which was in doubt a little while ago) is now almost entirely dependent on an e-reader rather than, ya know, the book stores. Good for them for tuning it around but what an odd twist (IMHO). More specific to the vol, I note that the 52 wk range is [50.55%, 112.73%], putting the current level in just the 28th percentile even after the pop today. Does it feel like the implied should be this low (relative to its own history) given all of the stuff above? Isn't solvency still an issue alongside a potential firm specific technological boom? Hmm....

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



We can see how the font month lies well above the back. This term structure is in direct reaction to the news today. I have included the Skew Tab from yesterday to demonstrate the change.



Note that the front month (red curve) was below the second month (yellow curve) for the ATM options. Then today happened.

Finally, let's look to the Options Tab.



Across the top we can see that Oct is priced to ~70% vol while Nov is priced to 68%. Again, this is more of a vol gainer but vol low story where solvency and new technology seem to be at play at the same time for a... book store...

This is trade analysis, not a recommendation.

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Staples (SPLS) - Elevated Vol May Breach Annual High into Nov Earnings

SPLS is trading $11.71, up small with IV30™ unched. The LIVEVOL® Pro Summary is below.



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Staples, Inc. (Staples) is an office products company. Staples operates in three business segments: North American Delivery, North American Retail and International Operations. As of January 28, 2012, the Company served businesses of all sizes and consumers in North America, Europe, Australia, South America and Asia.

This is a vol note, specifically an elevated vol note in a firm that I found using a custom scan.

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 goal with this scan is to identify short-term implied vol (IV30™) that is elevated 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 selling elevated IV30™ simply because earnings are approaching.

The SPLS Charts Tab (six months) is included 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 rather "gappy" stock ride down over the last half year. The six month return for SPLS has been -26.4% with two notable gaps down off of earnings (the "E" icon represents an earnings announcement). The 52 wk price range for SPLS is [$10.47, $16.60].

On the vol side we can see the story -- elevated implied to the two historical realized measures. IV30™ was 32.29% on 9-12-2012 and since that time (as of this writing) is up 38%. At that same time the stock is essentially unched (it closed at $11.54 on that day). The vol comps as of right now are:

IV30™: 44.55%
HV20™: 30.73%
HV180™: 34.61%

The 52 wk range in IV30™ is [21.74%, 53.43%], putting the current level in the 72nd percentile. The next earnings release should be in the Nov cycle.

Let's turn to the Skew Tab.



We can see a rather rickety skew -- Nov shows an upside bias while Dec looks like a random number generator. That upside skew in Nov is not trivial in that it's a dime bid in the Nov 14 calls but the NBB shows a size of over 5,000 contracts. In English, that upside bend isn't a random one lot dime bid. Given the ugliness of the last two earnings cycles, I'm a little surprised to see that upside skew.

Finally, let's turn to the Options Tab.



Across the top we can see the monthly vols are priced to 43.71%, 44.89, 43.06% for Oct, Nov and Dec, respectively. That Nov vol will likely rise as we approach earnings and it wouldn't surprise me if the vol reaches an annual high (or nears an annual high) given the last two earnings report reactions. Well over 50% vol in mid Nov (if earnings are in fact in Nov) is realistic if not expected, IMHO.

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CarMax (KMX) - Stock and Vol Rip on News; Skew is Disrupted -- Risk Profile Changes

KMX is trading $31.81, up 9.0% with IV30™ up 19.9%. The LIVEVOL® Pro Summary is below.



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CarMax, Inc. (CarMax) is a holding company and its operations are conducted through its subsidiaries. CarMax also wholesale used vehicles. The Company is a retailer of used cars, based on the 408,080 used vehicles it retailed during the fiscal year ended February 29, 2012 (fiscal 2012).

This is a vol, stock and order flow note. The catalyst for the move today is some news, and that is included below:

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Shares of Carmax (KMX) soared as much as 11.5% in early trading Monday after a report said the largest used-car dealership chain's revenue will rise 17% this quarter vs. last year.

The report on Carmax, by Theflyonthewall.com citing data from ITG Research, said CarMax is likely to top analysts' consensus estimate when it announces third quarter results in December.

Source: Investors.com via Yahoo! Finance; Carmax Surges On Report Of Sharp Rise In Q3 Sales, written by James Detar.
---

So there you go, good news 'n stuff. Let's start with the order flow. The company has traded over 15,000 contracts on total daily average option volume of just 1,320. Calls have traded on a 2.2:1 ratio and I do note that the daily average volume has a 1:1.6 call:put ratio (so more puts than calls). The Stats Tab snapshot is included (below).



The Options Tab (below) illustrates the action. The heaviest volume in the front two months is in the Oct 32 calls and Nov 33 calls (with some good volume in the Oct 32 puts as well). Note that the volume is greater (substantially so) than the existing OI -- so these feel like opening positions. The Oct 32 and Nov 33 calls all look like purchases to me -- just offers lifted without even an attempt to bid up and get better prices. In English, call buyers...



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



We can see how the front month is both (1) priced above the back expiry and (2) has developed an upside skew. In English, the option market reflects both more risk in the near-term than the intermediate-term and greater upside risk (potential) in the near-term.

I have included the Skew Tab from yesterday to demonstrate the change in the term structure in just one day.



Note how the front was priced below the back (for most strikes) and how the front did not show an upside skew. In English, the news today has dramatically changed the term-structure (I think I already said that...).

Finally, the Charts Tab (six 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 awesome move up over the last few trading days -- almost like the first few days were in anticipation of this news. On 10-3-2012 the stock closed at $28.32. As of this writing the stock is up 12.3% in the last five calendar days.

On the vol side we can see how the implied was in fact trading below both the short-term and long-term historical realized vols until today. The 52 wk range in IV30™ is [24.34%, 48.175], putting the current level in just the 21st percentile. I do find it compelling that the news today has pushed the stock, pushed the vol and disrupted the term structure, yet the IV30™ is still essentially in the bottom quintile. I also note the upside vol diff between Oct and Nov... hmmm....

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Groupon (GRPN) - Vol Elevates to Back; Earnings Due out in Front?

GRPN is trading $5.28, up 10% with IV30™ up 10.7%. The LIVEVOL® Pro Summary is below.



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Groupon, Inc. (Groupon) is a local e-commerce marketplace that connects merchants to consumers by offering goods and services at a discount. Each day the Company e-mails its subscribers discounted offers for goods and services that are targeted by location and personal preferences.

This is a vol note -- specifically with rising vol now the back month is elevated to the front -- yet the front has an earnings report. Let's start with the Charts Tab (six months), 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 disintegration of shareholder value. Just six months ago this was a $14.18 stock. As of this writing, the stock is down ~63% in that time frame. The 52 wk range in stock price is [$4.00, 31.14], so the all-time low feels steps away while that all-time high seems miles ahead.

On the vol side we can see how elevated the implied got into the most recent earnings report (the "E" icon represents the earnings date). We can also see the gap down in stock price off of that news. Since then the IV30™ has fallen off and found a sort of quiet period (or equilibrium). I do note the upswing in vol today -- though it's hard to see in the chart, a 10.7% rise in the implied isn't trivial. The 52 wk range in IV30™ is [45.36%, 154.30%], putting the current level in just the 39th percentile.

It's the Skew Tab that caught my eye, though.



We can see pretty clearly that the green curve (Nov) lies on top of the yellow curve (Oct). But, as far a I can tell -- a number of sources are projecting that the next earnings release for GRPN is in mid Oct. So... what's the happs?...

Let's turn to the Options Tab, for completeness.



Across the top we can see that Oct (monthly) is priced to 80.79% while Nov is priced 94.05%. Again, earnings should be (might be?) in Oct. We can also see that Oct vol has risen more than 12 vol points today while Nov is up just 5 vol points. Something's up... that or earnings really are due out in Nov, but if that's the case, why did Oct vol pop so much today? Back to my previous pearl of wisdom... something's up...

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Live Nation (LYV) - Vol Elevates; Earnings Take Back Seat?

LYV is trading $8.31, up small with IV30™ up 2.7%. The LIVEVOL® Pro Summary is below.



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Live Nation Entertainment, Inc. (Live Nation) is a live entertainment company. The Company is a producer of live music concerts worldwide. It operates in five segments: Concerts, Ticketing, Artist Nation, eCommerce and Sponsorship.

This is a vol note, specifically an elevated vol note with an unusual earnings vol pricing. Let's start with the Charts Tab (twelve months) 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 an incredibly volatile ride, yet not necessarily incredible returns. The stock was trading $7.68 six months ago, so it's up 8.2% in that time frame.

On the vol side we can see that the implied tends to trade above both of the historical realized vol measures. Recently, the IV30™ has spiked. The 52 wk range in IV30™ is [38.83%, 85.82%], putting the current level in the 70th percentile.

What's odd is the term structure... Let's turn to the Skew Tab.



We can see that there is a monotonic vol increase from the back to the front. And why is that weird?... As far as I can tell, the next earnings release is due out in the Nov cycle. Last year earnings were been released on 11-3-11 following a 8-8-11 prior release. The last earnings date for LYV was 8-7-12, so it's a reasonable expectation that the following report will also be in Nov. All that said, the Oct vol is elevated to Nov (and Jan' 13). Hmmm...

Let's turn to the Options Tab, for completeness.



Across the top we can see the monthly vols are priced to 83.30%, 61.78% and 53.13%, respectively for Oct, Nov and Jan'13. That's... different. There is clearly a known vol event embedded in the Oct options due out before Nov and more "risky" than the earnings announcement. Either that, or the earnings announcement is due out in Oct. Either way, this one feels like it's worth a closer look.

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Kohl's (KSS) - Vol Spikes, Disrupts Term Structure; Earnings Vol Left Behind

KSS is trading $52.14, up 2.4% with IV30™ up 16.5%. The LIVEVOL® Pro Summary is below.



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Kohl’s Corporation (Kohl’s) operate family-oriented department stores that sells apparel, footwear and accessories for women, men and children; soft home products, such as sheets and pillows, and housewares.

I found this stock using a custom scan searching for names where IV30™ is up at least 10% on the day. The scan details are below with a snapshot if you want to build it yourself in Livevol® Pro. This one is cool b/c of the implications it has had on the term structure at large in a single day.

Custom Scan Details
Stock Price GTE 10
Average Option Volume GTE 1,200
Days After Earnings GTE 5 and LTE 60
IV30™ Percent Change GTE 10%
IV30™ GTE 10

The goal here is find stocks more than $10, with a greater than 10% rise in IV30™ (short-term implied) that is not due to an earnings date, with enough option liquidity to trade.



The KSS 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).



On the stock side we can see a bumpy ride over the last six months, but broadening the perspective to the last six months, we can see the stock has essentially stood still.

On the vol side we can see an awesome run up in the implied of late. On 9-21-2012 the IV30™ was just 22.53%. As of this writing it's up nearly 42% in less than two weeks. The 52 wk range in IV30™ is [21.40%, 48.48%], putting the current level in the 40th percentile... but it's rising and is well above both the short-term and long-term historical realized vols.  The vol comps are:

IV30™: 31.96%
HV20™: 22.23%
HV180™: 25.62%

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



The red curve represents Oct, while yellow represents Nov. Note how elevated Oct is to Nov while the next earnings release is in Nov (and not in Oct). The move today has totally disrupted the term structure. Check out the Skew Tab from yesterday, below.



We can see how the two months were essentially on top of each other with little to no vol diff -- today, it's a totally different story.

Let's turn to the Options Tab, for completeness.



Across the op we can see the monthly vols are priced to 34.57% for Oct and 29.65% for Nov. Again, I believe the next earnings release for KSS is due out in Nov. Hmm...

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Leap Wireless (LEAP) - Vol Rips on PCS Potential Takeover; Skew Shifts Away from Earnings

LEAP is trading $7.94, up 13.4% with IV30™ up 16.7%. The LIVEVOL® Pro Summary is below.



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Leap Wireless International, Inc. (Leap) is a wireless communications carrier that offers digital wireless services in the United States under the Cricket brand. Leap’s Cricket service offerings provide customers with unlimited wireless services for a flat rate without requiring a fixed-term contract or a credit check.

This is a vol, stock and order flow note all based on the news that the DTEGY board (T-Mobile's parent) will be voting tomorrow on a takeover bid for PCS. LEAP and PCS have long been heavy takeover rumor stocks as the general belief supports the idea of consolidation in the mobile phone industry. Here's a quick news snippet:

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SAN FRANCISCO (MarketWatch) — Shares of pre-paid wireless carriers MetroPCS Communications and Leap Wireless International saw their stocks surge Tuesday on a deal rumor [...].

Source: MarketWatch via Yahoo! Finance MetroPCS, Leap shares soar; techs mixed, written by Dan Gallagher.
---

LEAP has traded just under 19,000 contracts on total daily average option volume of 2,016, with calls trading on a 9.6:1 ratio to puts. The Stats Tab is included (below).



The Options Tab (below) illustrates the action. We can see the Oct 8, Jan'13 5 and Jan'13 10 calls are the most active lines, although each strike has existing OI greater than the trade volume today. Even though the stock and vol are up today, it feels like some of this call volume is two-sided. This order flow side isn't obvious to me.



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



We can see two things that are in a sense, in contradiction to each other.

1. The skew shapes are normal across all three front expiries -- there does not seem to be crazy upside call buying and certainly the option market does not reflect elevated upside potential (risk) relative to downside risk. The skew is very much "normally" shaped.

2. The front month is now elevated to the second. Since Nov likely has the next earnings release (but outside of Oct), we would expect to see Nov elevated to Oct, and in fact, this was the case yesterday (before this PCS news). I have included the Skew tab from yesterday, below.



Here we can see that Oct (red curve) was in fact depressed to Nov (yellow curve). So, the contradiction here is that the option market does reflect more risk in Oct than Nov as of today, but not more upside risk (potential). This is more of a homogeneous risk elevation. It's also worth explicitly stating that the option market now reflects more risk in Oct from the PCS news (and any potential reverberations) than it does from earnings. Hmmm...

Let's turn to the Charts tab (six months), 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 incredibly "gappy" sock price evolution over the last six months in LEAP, and after all hat, it's essentially unched from six months ago. The 2 wk range in stock price is [$4.28, $11.30].

On the vol side we can see the turn up today in the implied -- a reaction to the PCS news. The 52 wk range  in IV30™ is [51.52%, 133.49%], putting the current level in the 53rd percentile (annual). So, in English, while vol is popping today, the implied is still right in the middle of its annual range.

Ultimately the action is in PCS in terms of news, but the vol move in LEAP is undeniably compelling...

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BMC Software (BMC) - Stock and Vol Pop on Takeover News; Disrupted Skew Searches for Price Discovery

BMC is trading $42.72, up 3.0% IV30™ up 28.1%. The LIVEVOL® Pro Summary is below.



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BMC Software, Inc. (BMC) is a software company. The Company provides information technology (IT) management solutions for large, mid-sized and small enterprises and public sector organizations around the world.

This is a vol and skew note -- specifically how skew can be disrupted overnight with a takeover rumor. Let's start wit the news that's driving this vol today. Simply stated, BMC has hired Bank of America Merrill Lynch to help find a buyer according to a report from the Wall Street Journal (source: Reuters).

Let's go straight to the Skew Tab. First, the skew from today.



We can see an awesome front month upside skew -- the OTM calls are bid higher than any other vol on any other line in any other month. Keep in mind that the next earnings release for BMC should be in the Nov cycle (but outside of Oct), so those OTM calls are actually priced higher than the vol in the earnings month. A fair question to ask is, "is this b/c of the news today?" Let's look at the skew as of Friday's close, below.



Here we can see a normal skew shape across all three front expiries -- Nov is the most elevated due to earnings and all three months show no upside skew. In English, yeah, it's the news today that has rocked the skew and the option market now reflects substantially more upside risk (potential) in Oct upside than any other month. This is price discovery at its finest.

We can quickly turn to the Charts Tab (six months), 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 the gap up today on the news. The 52 wk range is [$31.62, $45.70], so the company is nearing an annual high.

On the vol side we can see the spike up in the implied. Although the IV30™ is just in the 42nd percentile (annual), it's up nearly 30% on the day alone.

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



Just as one example, we can see that the Oct/Nov 48 call spread shows a 5 point vol diff in favor of Oct (without earnings). Very cool.

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