Apple (AAPL) - This Just Isn't the Company it Used to Be... And it Never Will Be Again.

AAPLis trading $390.50, down 3.0% with IV30™ up 1.6%. The LIVEVOL® Pro Summary is below.



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Apple Inc. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.

The stock price today is an annual low and the implied is an annual high. Earnings are due out on 4-23-2013. I have seen a lot written and heard a lot spoken about AAPL by very reasonable and intelligent people. There's just one thing... I think most of them are wrong (which may very well make me the fool at the poker table).

I wrote a few articles on APPL between early Dec of last year and late Jan of this year when the stock was trading in $530 range. You can read those posts here, but really the article titles and the recap I will provide below may make visiting the old posts unnecessary.


1-23-2013
Apple (AAPL) - "Just the Facts Ma'am" -- Well, that Supports the Opinion: "Everything has Changed. The Old AAPL is No More."

12-5-2012
Apple (AAPL) - Have We Moved into a Totally New Volatility Paradigm for This Company? Has Everything Changed?

12-10-2012
AAPL - Everything has Changed. The Old AAPL is No More. The New AAPL is a Riskier Entity and the Market Doesn't Know What that Means Yet

Here's a recap of those posts which I still hold to be true, IMHO. Then I will go into the current situation and specifically demonstrate why I believe the Dec articles are still accurate. This really isn't a chest pounding roar of "how I was right," it's just what I see in the option market, for whatever that's worth (if anything).

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1-23-2013

In my opinion, AAPL is a completely different entity than it was prior to Mr. Jobs' passing. I think AAPL is MSFT -- not yet, but soon... A company with disruptive technology unafraid to use less than the most ethical approaches to dominate markets, but this is America, and there are competitors, and eventually, someone else has the boy (or girl) genius with the next big ideas. Gates is done breaking the barriers of new ideas and technology. Jobs is too (absolutely all due respect). Remember when MSFT had a market cap of $600 billion?

On the vol side we can see that the implied has been rising into the event, but in sort of empirical yet circumstantial evidence of my prior hypothesis that AAPL is in fact a totally different entity than it was a year ago (or whatever), we can see the implied is trading higher than the last eight earnings announcements. Note the blue "E" icon on the stock chart indicating earnings.

Last eight earnings announcements (IV30™):
Today: 42.27%
12-25-2012: 36.79%
7-24-212: 34.99%
4-24-2012: 40.43%
1-24-2012: 32.35%
10-18-2011: 37.58%
7-18-2011: 32.06%
4-20-2011: 27.51%

So, in English, the options are reflecting greater risk now into this earnings announcement than in the prior two years (eight earnings reports). Again, circumstantial evidence of my hypothesis.
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12-5-2012
This is a vol and stock note on the largest company in the world. I see a potential paradigm shift in the way the option market reflects risk in APPL -- and the shift is not trivial. I'll even call on your knowledge of Econ 101 from your college days.

In terms of a six-month return the stock has gone from $562.83 (6-5-2012) to now just under $550 for a modest 2.4% decline. Of course, the focus has been over the last 2.5 months -- AAPL hit an all-time high of $705.07 on 9-21-2012 and since then (as of this writing) is down over 22%. Note the free-fall from the all-time high to the low on 11-15-2012. The 52 wk range in APPL is [374.36, $705.07].

On the vol side, we can see recent rise in the implied.

But, here's what really caught my eye. The most recent closing low in stock price was on 11-15-2012 when AAPL closed at $525.62. At that time, the IV30™ was rising and hit 32.55%. Shortly thereafter, we can see the stock rise again, only to now start another downward trend. But, with the stock $20 lower then than it is today and in what for all intents and purposes was an absolute free fall from an all-time high (see the chart again), the implied only hit 32.55% on 11-15-2012.

But now, with the stock having already reversed the straight down move from the all-time high, and now headed on a new downward trajectory (after a small recovery), the vol has expanded (increased) significantly more to over 36%. So we see a $20 higher stock price now, with a free fall having ended, yet the implied is now higher than it was during the free fall. In English, the risk reflected by the option market has shifted -- it's higher.

Vol can behave much like demand (in fact, vol is demand for protection (puts) or speculation (calls)), where there can be an increase in quantity demanded (that's moving on the same demand curve to the right) and an increase in demand (which is a totally new demand curve drawn above the prior one). I've included a contrived picture of some "widget" demonstrating the difference in an increase in quantity demanded (moving from one red dot to the other) and an increase in demand (moving from blue Demand curve D to red Demand curve D'), below.



IMHO, AAPL is seeing a new demand curve (i.e. vol) -- we're no longer moving on the same vol curve and have moved to a new (higher) one. Like the difference between an increase in quantity demanded and an increase in demand, AAPL is showing a brand new risk curve -- a new paradigm if you will -- and it reflects higher risk.

This will be an interesting one to watch. If the hypothesis is correct, AAPL will be at elevated vol levels relative to the past in all situations (going up, standing still and going down). Those situations could (should) include earnings.
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12-10-2012
The main contention in that [12-5-2012] article was that I saw a potential paradigm shift in the way the option market reflected risk in APPL. The article today will focus on the same topic -- but with empirical evidence not from the implied volatility side (forward looking), but from the historical realized volatility side (backward looking).


Now to the historical vol measures.  First, I have included the HV180™ chart and below that the HV360™ chart for AAPL over two-years. Note that HV is measured in trading days (not calendar days like implied vol), so HV180™ represents an average of ~9 months of data and HV360™ represents an average of ~18 months of data. So, in English, these are long-term trends not affected by short lived stock volatility.

AAPL HV180™


AAPL HV360™


I've drawn that yellow horizontal line to make it easier to see the high. What we can see here is that AAPL is now at multi-year highs for the very long-term HV180™ and HV360™ measures.

A fair question to ask, is, "how does this compare to the broader market?" Of course, the rationale being, if AAPL is mirroring the overall market, then this is not a firm specific trend, it's a coincidental data point.

Below I have included the same two charts, but have added the long-term HV for SPY as well.

AAPL HV180™ vs SPY HV180™


AAPL HV360™ vs SPY HV360™


I've highlighted the growing vol difference for both measures. The long-term HV measures for AAPL are rising as the SPY long-term HV measures are flattening. It bears repeating that the charts we're looking at here comprise of 9 months and 18 months of closing stock price data -- these are not averages that move easily with the blowing of the wind. These are very long-term measures for the largest company in the world.

The bottom line, in my opinion, whether it's b/c of the loss of Steve jobs, or a variety of other technology specific reasons (or all combined), AAPL is no longer the AAPL we once knew. The implied volatility (option market forward looking measures) bear this out, and the empirical historical stock movement bears it out as well.

The old AAPL is no more. And new AAPL is a riskier entity -- so says the option market and so says the empirical historical long-term stock returns.

This is a different company -- and the market doesn't know what that means yet.
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So that's the recap, and now here is what I see today.

Let's start with the one-year Charts Tab 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 stock has fallen 45% from its all-time high and ~25% since the Dec articles. The stock is now at an annual low and has made consecutive annual lows for the last several trading sessions.

Let's turn to the vol side, where I re-iterate my belief that the old AAPL is no more...



I have highlighted in yellow the IV30™ for the last four earnings cycles and the level as of today. The implied is trading higher than all prior four earnings cycles and is still a few days away from the next earnings release. In fact, though it is not pictured here, the vol is higher than prior five earnings cycles. In English, the vol should continue to climb into that 4-23-2013 date.

So, I see continued annual highs in vol every trading day moving forward until the earnings release barring any reports from the firm or any research firms which sort of break the "silence" of news. But, what about the overall market?

The VIX is sitting at 17.81% today. Here is the VIX on the date of the prior five earnings cycles for AAPL:

1-24-2012: 18.91%
4-24-2012: 18.10%
7-24-2012: 20.47%
10-25-2012: 18.12%
1-23-2013: 12.46%

So, with the exception of last Jan's earnings release, the market vol (VIX) has been higher than the current level while at the same time AAPL's implied into earnings has been rising. So VIX was lower, but APPL vol was higher.

In my opinion, AAPL simply is becoming Microsoft. A massively successful, free-cash flow machine that in many respects is a technology laggard rather than leader. When Bill Gates stepped aside as CEO, MSFT had its issues. With the passing of Steve Jobs, AAPL has its issues too. But the evidence reflects the same conclusions as before with one exception.

Last time I said:
"The old AAPL is no more. And new AAPL is a riskier entity -- so says the option market and so says the empirical historical long-term stock returns.

This is a different company -- and the market doesn't know what that means yet."

Now I say:

This is a different company -- and the market DOES know what that means. That's why it has lost more than $200 billion in market capitalization and continues to breach new highs in volatility even with a lower VIX.

There will be ebbs and flows and certainly AAPL may be due for a bounce -- earnings could be awesome... but this isn't the company it used to be... it just isn't... and it never will be again.

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Cardinal Health (CAH) - Vol Breaches Annual High in Explosive Trend; Earnings, Credit Watch and Maybe Something Else?

CAH is trading $42.85, down 0.4% with IV30™ up 0.3%. The LIVEVOL® Pro Summary is below.



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Cardinal Health, Inc. is a healthcare services company providing products and services that help pharmacies, hospitals, surgery centers, physician offices and other healthcare providers.

I found this stock using a real-time custom scan. This one hunts for elevated vols. The phenomenon I’m following in this name is that the implied has hit an annual high yet earnings are still several weeks away. Or, In English, the vol has breached a new high and is likely to continue to do so every day for the next three weeks unless there’s “something else” due before earnings.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 25
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 one-year CAH 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 sustained period of price appreciation broken by an abrupt gap down on 3-19-2012. The news driving that move stemmed from the revelation that CAH had lost its contract with Walgreens which then turned into a credit review from Moody’s. Now that sounds like a risky event, but note where the IV30™ was at the time (the red-line in the bottom portion of that chart above).

And today… vol as continued its upward march. Let’s turn to a one-year IV30™ chart in isolation, below.



Check out that rise in the implied – quite abrupt. Further, check out the vol levels in the prior earnings releases (the blue “E” icon). We can see how much higher IV30™ is right now than it was for any other earnings release and we’re still several weeks away from that volatility event. It feels like there is another event that is pushing the vol – one that may be due out before earnings. Either that, or there is a great deal of trepidation about the earnings call given the Walgreens news.

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



Across the top we can see the vols by month are 19.32% for Apr and 27.58% for May. In English, the “event,” whether it’s earnings or something else, is coming after Apr expiry... or so reflects the option market.


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Gold Panic is Real; ls China Falling into a Deflationary Vortex -- has the Chinese Apocalypse Started? Really?...

This is a follow up the the post written on 7-12-2012. You can read that article here (but I'll re-cap below, so skip it...):
Has the Chinese Apocalypse Started? Is China on the Cusp of a Deflationary Vortex?

Six days after that (7-18-2012) I wrote this article:
Is China Collapsing into a Fraud Epidemic... Just Like the US?

And, on 9-29-2011, I wrote this article as a preamble:
Is China A State Backed Accounting Fraud Epidemic?

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Before we dig into that last post(s) (since I know you guys want a re-cap rather than to read the whole thing again -- and I don't blame you), I'm going to start with the news in the last week, today and then a re-cap of the past.

First for the last week, we can see a panic (yes, it is a panic) in gold prices. Just looking at GLD (the SPDR for Gold Shares), we can see that the IV30™ has risen from ~12% on Tuesday of last week to now ~ 31% today. I've included the two LIVEVOL® Pro Summaries below.

4-15-2013


4-9-2013


Not only is the IV30™ up 57.5% today and the price down 8.0%, but over the last six calendar days the implied is up 152% and the price is down 13.6%. The price is now well into multi-year low territory. I have included the two-year GLD stock chart below and the one-year IV30™ chart below that.

GLD Price


GLD Vol


And there you have it... a panic... But this is an article about China, right? Yes... it is... And that's why commodity prices are collapsing and the risk reflected in them is behaving not like a risk adjustment, but rather unbridled fear.

The news out of China today was this:

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China’s GDP grew at a 7.7% annual rate in the first quarter--less than the 8% economists had forecast--and the news sent gold and global markets tumbling. China's Q1 GDP is below the 7.9% growth rate recorded in the fourth quarter of last year.

The disappointing Chinese GDP report, viewed in the context of slow growth in the U.S., recession in Europe and near zero growth in Japan, is fueling fears that the global recovery is in danger, says The Daily Ticker’s Aaron Task.

It’s also re-igniting concerns about overbuilding in China’s real estate market.

“If the economy is growing only at 7.7% and they’ve built these stockpiles of unneeded stuff, then you could have demand for commodities collapse and the economy could collapse as a result of that,” says The Daily Ticker’s Henry Blodget.

Source: Yahoo! Finance; Commodities, Stocks Drop on China GDP Report; Even Bird Flu Has Investors Worried
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In the article I posted on 7-12-2012, there were some trends that seemed like they could be... scary... Here's a recap:

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Let's start with premise in Dec and some snippets and bullet points to make it flow quickly. The source for this information comes from an interview with Gordan Chang on Yahoo!. You can listen to that interview here:
The Wheels Are Coming Off China’s Economy: Gordon Chang

Dec 20, 2011
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Gordon Chang, author of "The Coming Collapse of China" and a columnist at Forbes.com, has been sounding the alarm bells about China for years and backs up his prognosis with recent government data:

-electricity consumption is flat
-car sales - a bellwether for consumption - are flat
-property prices are collapsing - even in cities like Shanghai and Beijing
-industrial orders are down - especially those relating to the domestic economy"


Point #1: It's not inflation to fear, but deflation
The Chinese government (and the world at large) has been vigilant if not obsessive about China’s rate of inflation. Most of the focus has been on keeping it from going too high as elevated inflation would prevent them from continually flooding the economy with money. But, the numbers reported by the Chinese government state that inflation fell from 5.5% in October down to 4.2% in November. Good right? Not quite. Chang claims that inflation dropping is a problem if it’s too fast – and he’s right. If those numbers are accurate – 1.3% in a month is almost preposterous. If repeated, that’s not a slowdown – that really is a collapse.

Point #2: Property values are plummeting
What does Mr. Chang mean by collapsing property values? According to him, property values fell by 30% in Shanghai and Beijing in the month of October, alone.

Point #3: Chinese provinces are in trouble -- pumping money in won't work
China’s fix (actually the entire world’s fix) for a potentially fledgling economy has been to pump money into the economy (see the US and Eurozone). But, there’s a problem with that now.

Gordon says China cannot pump more money into the system to stimulate growth because of "questionable bank loans" and the high number of local Chinese provinces in debt.

Point #4: They’ve already built their ghost cities
Chang drops a bomb with a statistic on Chinese M2. He claims that China’s M2 at the end of Nov was 34% larger than the United States’ even though the US economy is more than twice the size of China’s. In other words, there is money and liquidity – some could say, a glut of liquidity. In English, the liquidity that’s present isn’t getting used so adding more money won’t do anything. As Chang puts it, "They’ve already built their ghost cities."

There are several factors contributing to China's slowdown, and Europe certainly plays a big factor. Europe is China's largest trading partner and Chinese export orders in November dropped sharply from October, rising 13.8% last month from 15.9% in October. As reported by The Wall Street Journal, China's labor costs are no longer considered "cheap" as fewer migrant workers choose factory jobs, thus "pushing up labor costs."

"We'll see more obvious signs of deterioration in the Chinese economy over the next six months," says Chang.
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Let's fast forward to the present [NB: this was 7-12-2012]. The two sources I make most use of are:
1. The last thing the world needs now is a deflationary shock from China. Source: The Telegraph, written by Ambrose Evans-Pritchard

2. China’s ‘5 apocalypses’ signal global recession. Source: Marketwatch, written by Paul B. Farrell

I'll source these throughout the article by referring to the source number (i.e. #1 or #2).

Here are the arguments that the stern warning in December was right:

Remember point #1 from Chang: It's not inflation to fear, but deflation
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Source: #1
China is on the cusp of a deflationary vortex.

This was signaled late last year by the sharpest contraction in the (real) M1 money supply since modern records began. The hard data is now confirming the warnings.

(I've included a 5 year chart of Chinese M1; Source: Bloomberg (http://www.bloomberg.com/quote/CNMS1YOY:IND/chart))

China Monthly Money Supply ( 5years)


Consumer prices have been falling for the last three months, producer prices have been falling for four months. This is not a food cost story. It is systemic.

"While an economy-wide generalized deflation is yet to be seen, the deflationary spiral looks to have started in some industrial sectors, attesting to considerable stress with the economy. Persistent deflation can be poisonous," said Xianfang Ren from IHS Global Insight in Beijing.

China CPI (Jan 2011 - present)
Source: Trading Economics (http://www.tradingeconomics.com/china/inflation-cpi)


Indeed it can be poisonous, and China already has the twin-afflictions of the deflation malaise: a fast aging nation, and a surfeit of factories and industrial plant.

Source: #2
Five months ago, we quoted World Bank President Robert Zoellick’s warning of “a spreading crisis” in China that could consume the $75 trillion global economy. Back then we bluntly asked: “China? Or America? Who will crash the global economy first?” Think: China.

China’s economy of 1.3 billion people continues slowing, according to the latest GDP-forecast downgrade from Premier Wen Jiabao, reported Keith Bradsher of the New York Times.

“China might already be in recession,” warns Trefor Moss in his brilliant “5 Signs of the Chinese Economic Apocalypse” in the journal Foreign Policy. Actually, five huge apocalypses. “The numbers show that the country’s storied growth engine has slipped out of gear. Businesses are taking fewer loans. Manufacturing output has tanked. Interest rates have unexpectedly been cut. Imports are flat. GDP growth projections are down.” Wen Jiabao’s 2012 growth target at 7.5%, if it happens, “would be China’s lowest annual growth rate since 1990.”

[...]

Export growth is also slowing — to Europe and the U.S., as well as Brazil. In fact, “exporters are going bust, and some factories that remain open have switched from three shifts to just one.” Meanwhile, migrant workers are creating “mass incidents” that could explode into an inland version of Tiananmen Square as China, as a developed nation, finds its growth rate gradually slowing. Think: Arab Spring, Occupy Wall Street, Greek riots.

Obviously the Chinese are having real problems blending central planning with free-market capitalism in a global marketplace with everybody competing for the same scarce resources. China’s learning these lessons the hard way. The price of coal has dropped 10% in the past year. “This drop could further dent the global economy,” cooling demand for exports.
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Remember Point #2: Property values are plummeting
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Source: #2
China’s central government decided to cool the overheated real-estate market. Property sales and revenue then dropped, creating a shortage of cash and confidence among potential buyers. Sounds familiar? Like here in America, where government revenues declined with taxpayers’ and investors’ income and spending? Yes, China’s economy is slowing. China, in fact, is most likely in a recession. And exporting it to America.

Source: #1
The problem was the explosive growth of credit in the preceding years. China was no slouch in this area. The IMF’s Zhu Min says loans doubled to almost 200pc of GDP between 2006 and 2011, including off-books lending.

This is roughly twice the intensity of credit growth – around 50 percentage points of GDP – before the US and Japanese blow-offs.

There seems to a near universal assumption that China can pull the levers of the state banking system and set off a fresh credit boom whenever it wants.

Well, perhaps, but loan demand has withered. The big four banks lent just 190bn yuan in June, down from 253bn in May.

"Large banks are all offering money, but no one is taking it," said a Shanghai dealer quoted by Reuters. This is more or less what happened in Japan in the 1990s, what is happening in Europe now. It is what happened to half the world in the 1930s.
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Remember Point #3: Chinese provinces are in trouble -- pumping money in won't work
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Source: #2
Warning: China’s local governments drowning in debt
Remember the hundreds of billions of dollars that went to U.S. banks? Well, the China central government gave a $586 billion stimulus package to local governments.

Back in the boom days, many of China’s local governments went wild, like pension funds in America, and bought fleets of “flashy cars.” But now, for example, “the city of Wenzhou is planning to auction off 80% of its vehicles this year,” reports Moss. “That’s 1,300 cars, with similar fire sales occurring nationwide.”

Remember Point #4: They’ve already built their ghost cities
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Source: #1
Macao’s casino revenue – that closely watched proxy for the Chinese economy – dropped 11pc in June. Commodity stockpiles are grinding ever higher, with coal depots bursting at Tianjin and other key ports.

Steelhome China Thermal Coal Inventory Tianjin Port (YTD)
Source: Bloomberg (http://www.bloomberg.com/quote/SCVCTIAN:IND/chart)


Steelhome China Thermal Coal Inventory Tianjin Port (5 Years)
Source: Bloomberg (http://www.bloomberg.com/quote/SCVCTIAN:IND/chart)


[A]t the end of the day, the country is bursting with industrial over-capacity. As Caixin reported recently, eight of the ten largest shipyards did not receive any new orders in the first five months of the year.

Source: #2
[...] China started importing to satisfy increasing energy demands. But now “China’s ports are piled high with coal that should be roaring in the country’s power plants.” Why? “Lower manufacturing output,” answers Moss. Last year planners were stockpiling emergency coal. Now demand is dropping as “hard-pressed citizens, businesses, and factories cut their electricity consumption in order to reduce their bills.”
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More disturbing trends
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Source: #2

Chinese billionaires don’t trust their government, so they’re “looking overseas to invest in high-end property,” creating a wave of wealthy Chinese seeking foreign residences. Why? Great deals. Versus too many local restrictions. And, notes Moss, as “a hedge against political and economic uncertainty at home.”

Moss reports that Chinese prosecutors have gone after 19,000 dirty officials since 2000: “China’s wealthy and politically powerful are often members of the same family, and if China really does go into recession, a lot of rich people may decide to cut and run.”
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Earlier this week, MarketWatch’s Carla Mozee reported that China’s slowdown is already impacting stocks in Brazil, one of China’s leading trading partners. (Source: #2).

Albert Edwards from Societe Generale said the danger now is that China suddenly lurches into a deeper downturn, unleashing a flood of excess goods onto global markets and sending a powerful deflationary impulse across the world (Source: #1).

7-12-2012 Conclusion
The bell ringing and hand waving in December about this Summer ultimately seems to be, at least in part, correct. There's no getting around it, China has new found problems and as the second largest economy in the world (and the fastest growing of the big boys), the balance of the global economic system may be in the balance. After all, who's going to come to the rescue? The EuroZone? Will that term even exist in five years? The United States? Really?...

This is scary stuff but there has been scary stuff written about China before... for a long time. Ultimately, I don't think anyone knows, and whoever ends up being right (between those that see this as a cataclysm and those that don't), in many ways, they may be right out of coincidence.

I will leave you with the final words from the article in Source #1:

"Woe betide the world if China does indeed land with a thud. We will then have a synchronised planetary slump for the first time since you know when."
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Here's the thing... If China is reporting slower GDP growth openly, what's really happening? Does 7.7% (annualized) really mean that or does it mean 6.7%... or 5.7%... or negative growth? Looking at company specific "disclosures," China has been the epitome of poor transparency. Note just the title of the article I posted six days after the 7-12-2012 article:
Is China Collapsing into a Fraud Epidemic... Just Like the US?

The EuroZone is not the game to watch... Watch China.  Then use your magic glasses that turn what you're seeing into some sort of truth -- whatever that truth is.

Don't panic -- but acknowledge one when it happens.  This too shall pass.  Even if it passes after a disaster... Just remember, today is not a disaster... And tomorrow isn't here yet.

And all the fraud epidemic stuff... As a famously quoted Buddhist monk once said, "Is that so?"

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Gold (GLD) (IAG) - Systematic Risk Overwhelms Firm Specific Risk; If You Hold a Portfolio of Gold Stocks, You're Not Hedged

IAG is trading $5.84, down 5.8% with IV30™ up 4.2%.
GLD is trading $145.21, down 3.9% with IV30™ up 25.5%.

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GLD: SPDR Gold Trust (the Trust) is an investment trust. The Trust holds gold and issues shares (Shares) (in minimum blocks of 100,000 Shares, also referred to as Baskets) in exchange for deposits of gold and distributes gold in connection with redemption of Baskets.

IAG: AMGOLD Corporation (IAMGOLD) is a mining company. IAMGOLD‘s interests include five operating gold mines, a niobium mine, a diamond royalty, and exploration and development projects located in Africa and the Americas.

This is a note on gold, both evergreen (GLD) and specific to one company (IAG) that caught my eye due to a new annual high in vol as the stock has absolutely cratered in the last few months.

Let's start with GLD (broader topic) and then move to IAG (company specific). Here's a motivating snippet from a Yahoo! Finance article:

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Gold is breaking below long term support in early trading, continuing to erode the bedrock of the idea that the yellow metal is a way to hedge against the vicissitudes of capital markets. When stocks rise, as they have all year, gold moves lower. Unfortunately for gold bugs the reverse hasn't been true of late. When stocks have been weak, gold has failed right along with it.

[...]

If gold breaks current levels and can't hold $1,470, it's got a long way to fall as far as the Option Monster is concerned. [Jon Najarian] doesn't see additional support until $1,340 and isn't going to hang around until it gets there if the first line of support doesn't hold.

As always, such price targets will be irrelevant if and when the global currency system collapses and the yellow metal finally becomes the only real currency in the world. Should that be the case, gold will presumably move much higher.

Source: Yahoo! Finance Gold Getting Hammered Again! Watch $1,470 Support Level, Says Najarian
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Let's turn to the six-month stock chart for GLD -- it's eye catching...



We can see that six-months ago the ETF was trading at $170.06 and as of this writing is trading at $145.21. We can also wee the abrupt move down today and the rater incredible pop in volatility.

Now let's turn to IAG and a one-chart. 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 side that IAG reached over $16 in Oct of last year and is now trading ~65% lower in less than six months.

Let's look at the one-year IV30™ chart in isolation below to examine the vol.



As the price has seen a cataclysmic decline in six months, so the vol has climbed. The IV30™ was in the 35% range in Sep of last year and is now ~55% higher. In English, this firm's value has been cut by two-thirds and the option market reflects 50% higher risk now than six-months ago. That vol level is an annual high.

Things have gotten so fast and furious in the broader picture for the precious yellow metal, that firm specific risk has taken a back seat. What do I mean?...

Let's check out the Options Tab (below) for IAG.



Note across the top the monthly vols. We can see that Apr is priced just a bit higher than May.. So what?... Well, IAG has earnings due out in May not Apr. Under normal circumstances that would push May vol considerably higher than Apr due to the firm specific event (aka earnings). But, the broader risk (systematic risk) to gold as now over shadowed firm specific risk (in this case and I venture to say in others).

Why does that matter?... If you hold a portfolio of say a number N gold stocks, you're not hedged -- you're holding the same stock N times.

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Thermo Fisher Scientific (TMO) - Stock at Multi-year Highs; Vol at Annual High; Earnings Vol Priced Below Immediate Term.. Something is Coming...

TMO is trading $80.00, down 1.6% with IV30™ up 1.8%. The LIVEVOL® Pro Summary is below.



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Thermo Fisher Scientific Inc. (Thermo Fisher) is engaged in serving science. It operates in three segments: Analytical Technologies, Specialty Diagnostics and Laboratory Products and Services.

I found this stock using a real-time custom scan. This one hunts for elevated vols. The vol is hitting an annual high while the stock is hitting multi-year highs. At the same time, there is a calendar vol diff where Apr is more expensive than May -- but earnings are in the May expiry... This is a cool one...

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 TMO 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 that other than the little blip today, the price has basically been headed straight up and is in multi-year high territory. But, this is a vol note, so let's look at the one-year IV30™ chart in isolation.



We can see how elevated the implied is right now -- an annual high and in quite dramatic fashion. But here's the thing... earnings are likely due out after Apr expiry. For the last few years earnings were reported on:

Apr 25, 2012
Apr 27, 2011
Apr 28, 2010

Since Apr expiry falls on Friday the 19th (officially Saturday the 20th), it's likely that earnings are due out after Apr. But... look at the Skew Tab, below:



We can see how elevated Apr is to May. So as the stock is reaching multi-year highs and the vol is breaking an annual high, the earnings vol (risk) is priced less than the short-term risk to Apr expiry. Very, very interesting.

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



Across the top we can see Apr is priced to 43.01% while May is priced to 31.35%... To say the least, that's odd considering the likely earnings date.


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Lamar Advertising (LAMR) - Vol Rises in Non-Earnings Month; Downside Risk More than Doubles as Stock Rises 100%

LAMR is trading $47.92, up 1.2% with IV30™ up 1.6%. The LIVEVOL® Pro Summary is below.



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Lamar Advertising Company (Lamar Advertising) is an outdoor advertising company in the United States based on number of displays and has operated under the Lamar name.

I found this stock using a real-time custom scan I built in Livevol Pro. This one hunts for calendar spreads between the front two monthly expiries. The fascinating phenomenon here is that the vol is elevated in the front, but the earnings are in the back. Also interesting is the way in which IV30™ is behaving – it’s telling us that earnings are due out now... but they aren’t?...

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 > 7
IV30™ GTE 30
Average Option Volume GTE 1,200

The goal with this scan is to identify back months that are cheaper than the front by at least 10 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume) and enough strikes to spread and thus a minimum stock price. I also require a minimum vol level in order to avoid any boring ETFs (or whatever).

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



We can see quite easily how the vol for every strike in Apr lies above May. Also, we can see how that vol diff gaps open to the downside. In English, the option market reflects greater risk in Apr than May, and even greater risk to the downside than the upside. But, here are the dates of the last several earnings around this time of year:

(1) May 3, 2012
(2) May 4, 2011
(3) May 6, 2010

So, earnings should be due out in May, not Apr. The last earnings release for LAMR was Feb 27, 2013, making an Apr release highly unlikely... right?

The one-year LAMR 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 see a very impressive price appreciation from below $25 in June of 2012 to now nearly double that. Again, the option market reflects greater risk to the downside in the near-term. Compelling and confusing...

But this is a vol note, so let’s isolate the IV30™ over the last year below.



We can see the how the implied spikes into each earnings announcement (the blue “E” icon). Now look at the IV30™ as of right now… It looks like an earnings announcement is coming just by the shape (spike) of the implied. But it isn’t. Hmm...

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



Across the top we can see the monthly vols are priced to 56.21% for Apr and 45.68% for May (and thus the trigger for the custom calendar spread scan). Note that while the ATM vol diff is ~10 vol points, if you look to the Apr/May 42 put spread (for example), all of a sudden we see a 22 point vol diff. Again, the option market reflects substantially higher downside risk in the near-term than in May (with earnings).

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Lululemon Athletica (LULU) - Vol Breaches Multi-Year Lows in a Sea of Rising Vols

LULU is trading $64.15, up 1.4% with IV30™ up 1.1%. The LIVEVOL® Pro Summary is below.



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Manufactures, distributes and sells technical athletics and yoga apparel. The Company works in cooperation with various athletes to create designs specific to meet their needs.

In a sea of red stock prices and rising vols, I found this stock using a real-time custom scan that hunts for depressed vols. LULU vol is at a multi-year low.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 20
IV30™ Percentile LTE 10
Average Option Volume GTE 1,200

The goal with this scan is to identify short-term implied vol (IV30™) that is depressed to its own annual history (at most in the 10th 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 LULU one-year 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).



More than anything, I note how choppy (read: volatile) the stock price has been over the last year. If we look at the vertical axis, we can see in fact that the volatile stock is in fact not quite as abrupt as first blush would appear. The 52 wk range in stock price is [$52.20, $81.09].

But, this is a vol note, so let's look at a two-year chart of the IV30™ in isolation.



The observation is rather simple -- the implied is now at multi-year lows. How odd....

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



Across the top we can see tat Apr vol is priced to 30.13% and May is priced to 30.91% -- so nearly identical risk reflected by the option market. This is a good name to follow, especially if you find yourself getting short vega and need a hedge.

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EXACT Sciences (EXAS) - The"Event" is Coming Very Soon... And it's a Big One...

EXAS is trading $9.70, down 0.8% with IV30™ down small. The LIVEVOL® Pro Summary is below.



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Exact Sciences Corporation is a molecular diagnostics company focused on the early detection and prevention of colorectal cancer. The Company’s Cologuard test is a non-invasive, stool-based DNA (sDNA) screening test designed to detect deoxyribonucleic acid (DNA) markers, which in published studies have been shown to be associated with colorectal cancer. In addition to DNA markers, its test includes a protein marker to detect blood in the stool, utilizing an antibody-based fecal immunochemical test (FIT).

This stock came up both on the elevated vol scan and the calendar spread scan. With earnings due out in May expiry, yet Apr vol is higher than May, we have a compelling story. Or, more simply stated, something big is coming... right now.

Let's turn to the two-year EXAS Charts Tab 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 sort of reversal occurring over the last several months. The stock was headed straight up, but now is bending back down. Still this was a $7.42 stock two-years ago, so there has been some price appreciation. But this is a vol note if I've ever seen one, so let's look to the two-year IV30™ chart in isolation, below.



I don't think there's much to say other than, "hi, can I see some rising vol, please?" We can see an absolute explosion over the last week (ish) with IV30™ going well into new multi-year high territory -- in fact, it is nearly double it's prior annual high before this latest run-up. The option market is pricing in extreme risk for this stock relative to its prior history. But, there's more...

Let's turn to the Skew Tab.



We can see that Apr vol (red curve) is well above May vol (yellow curve). So what?... Well, EXAS is likely to release earnings in May expiry (and outside of Apr expiry). Said differently, the "event" that is reflected in the options prices is due out in Apr, not May... And further, the option market reflects substantially higher risk to this event than to earnings.

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



Across the top we can see that Apr vol is priced to 185.30% while May is priced to 142.67%. So there you have it... The "event" is coming... soon... Given the line of work this firm is in, let's hope it's good news, not for the sake of shareholders, but for the sake of all the people that need this to be good news.

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Humana (HUM) - Vol Breaches Annual High; Buckle Up for News Pre-earnings; Then Buckle Up Again for Earnings; Two Vol Events in a Month

HUM is trading $70.15, up 1.5% with IV30™ popping 11.2%. The LIVEVOL® Pro Summary is below.



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Humana Inc. (Humana) is a health care company. Humana operates in three segments: Retail, Employer Group, and Health and Well-Being Services.

I found this stock using a real-time custom scan that hunts for calendar spreads between the front two monthly expiries. The interesting thing here is that HUM has earnings due out in the back month – or that’s my projection, meaning that the earnings can be owned for less than the front. Further, the stock has breached an annual high in IV30™ today – making this a wildly compelling phenomenon. Whatever the news that’s coming, the option market reflects not only greater risk to it than earnings, but greater risk now than at any time in the last year.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 > 7
IV30™ GTE 30
Average Option Volume GTE 1,200

The goal with this scan is to identify back months that are cheaper than the front by at least 10 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume) and enough strikes to spread and thus a minimum stock price. I also require a minimum vol level in order to avoid any boring ETFs (or whatever).

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



We can see quite clearly how elevated Apr is to May (red curve is above the yellow curve). For the last two years HUM has had earnings on 5-2-2011, 4-30-212 – both of which are outside of Apr expiry. I see the same timing pattern this year – that is, I project the same pattern based on the last earnings date of 2-4-2013.

The one-year HUM 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).



Y-O-Y it has not been a pretty picture for HUM with the stock dropping from $91.85 to now in the $70 range. Also, if you look at the last four earnings reports (the blue “E” icon) you can see quite substantial moves off of the news. So, in English, earnings reports are volatility events for HUM, yet whatever is coming before the earnings date appears to be an even greater volatility event.

Let’s turn to the one-year IV30™ chart in isolation, below.



We can see that with the pop in the implied today, HUM has breached an annual high in IV30™. So whatever the news that’s coming, the option market reflects not only greater risk to it than earnings, but greater risk now than at any period in the last year.

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



Across the top we can see that Apr is priced to 52.23 and May (with earnings) is priced to 41.87%. Something is coming for HUM – buckle up. Then re- adjust, and buckle up for earnings again.

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