Microsoft (MSFT) - CEO Steps Down; Stock Pops & Volatility Drops... But Someone Knew Ahead of Time. And So Did You.

MSFT is trading $34.40, up 6.2% with IV30™ down 13.1%. The LIVEVOL® Pro Summary is below.



Microsoft Corporation is engaged in developing, licensing and supporting a range of software products and services. The Company also designs and sells hardware, and delivers online advertising to the customers.

The option market priced in this event a week ago. And it appears there was some suspicious trading on 8-7-2013 (many thanks to Doris Frankel for pointing out the order flow). How about that?...

What I see here is evidence of potential improprietous usage of insider information and a fascinating reflection of this risk embedded inside the option market at large. And yes, there may have been rumors about this news, but someone speculated fairly largely to the upside on a stock that had just collapsed off of earnings for just a "rumor."

This is a follow up to the blog I posted on 8-20-2013 (i.e. three days ago). You can read that post by clicking on the title below:

Microsoft (MSFT) - Volatility Explodes, Stock Stays Still After Big Drop on Earnings; This is Not Equilibrium

As the title reads, my main contention three days was simply that the option market reflected extreme volatility in the near-term and that the stock, though it was trading in a tight range after the earnings fallout, was not at equilibrium. It turns out that the contention was correct -- MSFT was not at equilibrium, the stock did move big in the immediate-term and the volatility has now cooled off. The news "seemed" like a surprise, but not to the careful observer.  Here's a news snippet:

---
The announcement of Microsoft (MSFT) CEO Steve Ballmer’s plans to retire within the next 12 months was just seconds old when shares of the famed software maker took off, up 8% in pre-market trading merely on investor glee that the king was (almost) dead.

In regular early trading, Microsoft shares were up 7% in to $34.68. Since Ballmer owns some 333 million shares, news of his retirement actually boosted his own net worth by about $1 billion.

Source: The Exchange via Yahoo! Finance; Ballmer’s Pending Departure Only Makes His Mistakes More Obvious
---

For the sake of ease, let's look at the two company summaries from 8-19 and today (8-23) side-by-side, below:

8-19-2013


8-23-2013


We see the stock is up ~10% and the volatility is down ~15% from three days ago.

If we look at the Options Tab from the close on 8-7-2013, below, we can see that 62,500 Sep 32 calls and 83,200 Sep 33 calls traded on that day, and they were substantially purchases.  As we'll see later in this post, the OI in the Sep 33 calls is now 166,000+ while the OI in the Sep 32 calls is just under 80,000.  The Sep 33 calls were purchased for ~ $0.20 and mid-day today were priced at ~ $2.00.  That would be ~ 1000% in two weeks.



Let's examine this a little closer and turn to the Charts Tab (one-year) 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 first see the gap down on 7-19-2013 off of the earnings release from the day earlier (AMC).  But then, as I've highlighted, the stock found a quite period where it literally moved ~$0.35 close-to-close in ~a month time period.  Just stuck.  But not the volatility...

Let's turn to the one IV30™ chart in isolation below.



To quote my prior article:
---
We can see that even though earnings were quite disappointing, the vol dropped (as it normally does) after earnings. The news was digested, the equity value dipped and all seemed back to normal. But after the implied dipped to 17.4% on 8-2-103, it has since exploded up more than 52%, breaching an annual high on Friday.
---

Exactly, Ophir, the volatility exploded as the stock was sitting in a quiet period.  We can see that the level reached in the short-term implied was in fact an annual high... And what do you know, one week later, after a month of a frozen equity price, the stock has popped 6% and, note this, the volatility has dropped.  The vol drop reflects that whatever risk was lingering in the stock is now gone -- or in English, the risk was this announcement, and it's now happened.  Remarkable efficiency from the option market.  Remarkably good timing in the August 7th call purchases too.

Finally, let's turn to the Options Tab, below.


Across the top we can see that Sep vol is priced to 22.84% and Oct vol is priced 22.10%, both down substantially on the news today.  As I mentioned at the top, check out that OI in the Sep 32 and Sep 33 calls.  How fortunate for someone...

Well there you go.  MSFT was not in equilibrium, but the option market now reads that it is... at least for the short-term...

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

Tweet


Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Incyte (INCY) - Bio-Pharma Stock Explodes to 13-year High and Volatility Pops on Cancer Trial Results

INCY is trading $34.87, up 29.2% with IV30™ popping up 15.2%. The LIVEVOL® Pro Summary is below.



-------------------------------------------------------

Livevol Execution: Complex Trading Simplified



Click to Learn More
-------------------------------------------------------

Incyte Corporation (Incyte) is a biopharmaceutical company focused on the discovery, development and commercialization of small molecule drugs to treat serious unmet medical needs.

The news today that’s moving stock and volatility are results from a phase-two trial showing one of their compounds increased survival rates for pancreatic cancer significantly above the placebo. That is news indeed. This both an order flow and vol note.

I found INCY using the high option volume (relative to average) scan – it’s the single most active issue relative to its own average. I have included the Stats Tab snapshot. We can see that the company has already traded over 13,500 contracts traded on a total daily average volume of just 631. Calls have traded on a nearly 2:1 ratio to puts which is actually below the average of 2.8:1.



Let’s turn to the Charts Tab (two-year) 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 price is well into multi-year high territory. In fact, according to an article by IBD, this is a 13-year high in stock price. Just extraordinary…

But here’s the thing… It is extraordinary. So what is volatility doing? I have included the two-year IV30™ chart in isolation, below.



So the implied has popped today b/c of the news… OK, that makes sense. But what doesn’t make a lot of sense to me is why the volatility is “only” up this much. If we look over the last two-years we can see that the implied hit nearly 140% at one point, and even in the last ear it has been as high as 72.29%. So my question is, why is vol at 62%. Yes the news is out, but it wasn’t expected as far as the option market reflects. Volatility is up on the day, not down. So this looks like a surprise, and if it is, 62% vol??? Hmmm…

Finally, let’s look to the Options Tab.



Across the top we can see not only is Sep vol priced to 63.51%, but Oct and Dec decrease monotonically. In fact, for all expiries out to Jan’15 the volatility decreases monotonically. You mean to tell me that this is a ~49% vol stock in Mar of next year? OK… I would definitely put this one on a watch list. In any case, aside from stock prices and option volatility, let’s hope this drug is in fact all it seems to be and even more. While prevention of illness is the first choice, a treatment (or cure) is needed if prevention falls short.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

This is trade analysis, not a recommendation.

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

Microsoft (MSFT) - Volatility Explodes, Stock Stays Still After Big Drop on Earnings; This is Not Equilibrium

MSFT closed Monday at trading $31.39, down 1.3% with IV30™ down 1.1%. The LIVEVOL® Pro Summary is below.



-------------------------------------------------------

Livevol Execution: Complex Trading Simplified



Click to Learn More
-------------------------------------------------------

Microsoft Corporation is engaged in developing, licensing and supporting a range of software products and services. The Company also designs and sells hardware, and delivers online advertising to the customers.

This is an elevated vol note oddly in a huge firm that released earnings, saw a large drop, found an equilibrium and now all of a sudden sees higher volatility than it did pre-earnings. 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).



On the stock side we can see two phenomena pretty clearly:

(1) Y-O-Y MSFT has risen from $30.74 to now $31.39 - so essentially no move at all.

(2) The last earnings release (the blue "E" icon represents earnings) was not good news. Here's a quick snippet from that release on 7-18-2013:

---
NEW YORK (AP) -- Microsoft stock took a big hit on Friday, after the software giant behind Windows, the Xbox and Surface tablets reported disappointing results for the latest quarter.

The results, which fell below Wall Street's expectations, included a large write-off for Microsoft Corp.'s Surface RT business. A poor reception for Windows 8 contributed to a revenue drop in the company's operating system software unit.

Microsoft "struggled far more than we had expected," said Cowen & Co. analyst Gregg Moskowitz, who downgraded the company's stock to "Neutral" from "Buy," and cut his price target to $33 from $38,

The analyst said in a note to investors that he is "much less confident" that the company can deliver healthy growth in the near future due to the magnitude of the Windows decline, the challenges for Surface, pressure on profit margins and the company's reorganization plans.

Source: AP via Yahoo! Finance, Microsoft shares tumble after weak 4th-qtr results
---

Like I wrote, not good news... but this is a vol note, so let's turn to the one-year IV30™ chart below in isolation.



I've circled both the level of the implied right on earnings (~21%) and the level today. We can see that even though earnings were quite disappointing, the vol dropped (as it normally does) after earnings. The news was digested, the equity value dipped and all seemed back to normal. But after the implied dipped to
17.4% on 8-2-103, it has since exploded up more than 52%, breaching an annual high on Friday. Oddly, the stock has stayed still as it closed at $31.40 the day after earnings and is literally $0.01 lower on Monday's close. So... we have ripping volatility and no stock movement at all.

Finally, let's turn to the Options Tab.



Across the top we can see that Sep vol is priced to 26.53% while Oct is priced to 24.61% and Nov is priced to 25.40%. So for all of those expiries, we're seeing quite elevated levels. So the question is, what's going on with Microsoft? Whatever the answer, the volatility seems to be reflecting the reality that MSFT stock price is not in equilibrium, regardless of the non-existent move since the earnings drop.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

This is trade analysis, not a recommendation.

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

Biodel (BIOD) - Baby Bio-Pharma Set to Explode or Implode Soon; Option Market Points to Huge Upside Potential

BIOD is trading $5.23, up 9.9% with IV30™ up 2.7%. The LIVEVOL® Pro Summary is below.



Biodel Inc., a specialty biopharmaceutical company, focuses on the development and commercialization of treatments for diabetes in the United States. The company is involved in developing proprietary formulations of injectable recombinant human insulin for the treatment of patients with type 1 and type 2 diabetes. It also develops liquid glucagon formulations for use as a rescue treatment for diabetes patients experiencing severe hypoglycemia, or very low concentrations of blood glucose.

This is a volatility note in a $100MM market cap bio-tech with news coming that should be rip roaring one way or the other in terms of enterprise value. The firm has reported $0 in revenue and expenses lie almost entirely in R&D (and some SG&A).

The firm released earnings on Friday, and ZACKS research published a great summary article. Here are some snippets:

---
Biodel Inc. (BIOD) reported third-quarter fiscal 2013 loss of 66 cents per share, wider than the year-ago loss of 52 cents and the Zacks Consensus Estimate of 37 cents per share.

Biodel did not generate revenues in the reported quarter and also in the year-ago comparable quarter.

-- snip--

Biodel has finished dosing patients in the phase II randomized, open label, parallel group study conducted across approximately 33 U.S. sites. Approximately 132 patients suffering from type I diabetes were randomized to receive either BIOD-123 or Eli Lilly and Company’s (LLY) Humalog as meal-time insulin during the therapy duration of 18 weeks. In the study, the primary endpoint is HbA1c control. The secondary endpoints are postprandial glucose excursions, glycemic variability, hypoglycemic event rates and weight changes.

Biodel expects to report top-line data from the study in the third quarter of calendar 2013.

Meanwhile, Biodel presented encouraging data from a phase I study on its two insulin Lispro-based formulations, BIOD-238 and BIOD-250, at the American Diabetes Association. Both candidates showed a significantly more rapid rate of absorption compared to Humalog and also compared favorably to Humalog where injection site tolerability is concerned.

Source: ZACKS Research via Yahoo! Finance Wider-than-Expected Loss at Biodel
---

My oh my... This company is itself an option. There are a number of binary events which will prove the determining factors in the firm's valuation and solvency. But when we look at the Skew Tab, I see some incredible stuff.




So we can see two phenomena that can't be ignored:

1. The front two months are substantially elevated to the third month.  That's likely driven by this news from the article above: "Biodel expects to report top-line data from the study in the third quarter of calendar 2013."  But, the front two months are sort of jumbled with Sep mostly above Oct, but not entirely.  The option market reflects the likelihood of news in the next two expiries, but a greater likelihood of the "event" in the Sep options cycle.

2. Check out the shape of the skew.  It's incredibly one-sided, or more specifically, upside biased.  The option market reflects substantially greater upside risk (potential) than downside risk.  Said differently, the option market is pricing in good news.  Hmmm...

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



We can see this was a $2.71 stock a year ago, so it has seen substantial appreciation with no revenue.  The equity market likes what it sees in terms of R&D so in that sense the equity and option markets agree.  The upside here is tangible.  On the vol side we can see huge implied now trading over 210%.  As I said, the news that's coming out is priced as though it will affect the enterprise value massively.

Finally, let's turn to the Options Tab.



Across the top we can see the monthly vols are priced to 214.68% for Sep, 204.70% for Oct and 164.74% for Dec.  So, it's the next two expiries that have this event priced in.  This will be an awesome one to watch. Note that the Sep 11 calls are priced to $0.40 fair value... That's ~120% higher than the current stock price.  Whoa... I also note that the "bankruptcy puts" (the $1 and $2 strikes) are no bid.

For all those in need of this type of medicine, let's hope it's positive results, regardless of equity and option values.

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

Tweet


Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

ICICI Bank (IBN) - Stock Craters as Volatility Spikes; Risk at Annual Highs per Option Market

IBN is trading $29.67, down 5.72% with IV30™ up 11.3%. The LIVEVOL® Pro Summary is below.



ICICI Bank Limited (the Bank) is a banking company. The Bank, together with its subsidiaries, joint ventures and associates, is a diversified financial services group providing a range of banking and financial services, including commercial banking, retail banking, project and corporate finance, working capital finance, insurance, venture capital and private equity, investment banking, broking and treasury products and services.

I found this stock using a real-time custom scan. This one hunts for elevated vols. I note that IBN is the top result – breaching an annual high in IV30™ and wait ‘til you see the stock chart.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200

The one-year IBN 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 the stock has come down from $34.44, but that’s not the story. Check out the decline since May. The stock peaked at $47.68 and in just four months has come crumbling down nearly 40%. And this is a $17B company – not some little known ADR.

If we look at the path the stock has taken in that four month period we can see several gaps down and yet again today we see a 5.7% drop.

Of course, this is a volatility note, so let’s turn to the one year IV30™ chart in isolation, below.



Check out the move since the middle of May. The implied has spiked 55% in coordination with the ~40% stock drop. As of today, the options reflect more risk in this name than at any point in the last year. Is this earnings related? Actually not… the firm released earnings on 8-2-13, this is much more than a surprise earnings release, it’s a systematic decline in enterprise value and a corresponding systematic increase in risk as reflected by the option market.

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



Across the top we can see that Sep vol is priced to 39.36% while Dec is priced pretty similarly at 38.38%. Whatever the case, I kinda get the feeling that IBN hasn’t exactly found a point of equilibrium yet. An annual high in vol makes sense…

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

Tweet


Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

The Home Depot (HD) - Annual High in Volatility is Actually Low Vol? Brace for Bell-Weather's Earnings

HD is trading $75.26, down 2.8% with IV30™ up 13.0%. The LIVEVOL® Pro Summary is below.



The Home Depot, Inc. (The Home Depot) is a home improvement retailer. The Company operates The Home Depot stores, which are full-service, warehouse-style stores. The Home Depot stores sell an assortment of building materials, home improvement and lawn and garden products and provide a number of services.

I found this stock using a real-time custom scan. This one hunts for elevated vols. Two things to note. First, HD is releasing earnings on 8-20-2013 (BMO) and second, the IV30™ as of this writing is at an annual high. But, I'm going to argue that the annual high in volatility is actually low...

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 25
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200

The two-year HD 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 impressive two-year return with the stock up from $33.12 or more than 120% higher in two-years.  But this is a vol note, and a remarkable one in my opinion.

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



So, on an annual basis we can see that the implied is in fact breaching a new high with the vol pop today.  But, that's not quite the full picture.  Let's look at the same chart but over two-years, below.



With this broader view we can see that HD has seen much higher levels of implied volatility over this two-year stuck run, with IV30™ reaching over 44%.

Now let's think about things for a sec...

HD is a bellwether, a $110B market cap representing the giant of giants in the D-I-Y and professional building world.  They matter and people will be watching the earnings they release as well as projections very closely.  How closely?  Well, CSCO and WMT just released earnings today, they were not good, the projections were not good, and the market is down size and VIX now trading at 14.48% (from 11.5% ish just a little while ago).

I say with the reaction to the news from those two bellwethers, the angst (read: risk) in HD's earnings has just grown. The option market agrees, as we do see a 13% pop in IV30™ today alone.  Is it possible that we just throw out the annual measures of volatility and look to a broader two-year scope?  If so, then HD's vol into earnings is low... How do you like that?... An annual high that's low...

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



Though not pictured above, the Aug23(W) options are priced to 36.72%.  I dunno.. that also feels like it could be low.  Whatever the case, somehow the 26.16% vol in Sep sure doesn't feel high... Right?... or No?...

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

Tweet


Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Netflix (NFLX) - Volatility Dips; Option Market Reflects Lowest Risk in Two Years

NFLX closed Tuesday trading at $259.19, up 1.0% with IV30™ down 5.3%. The LIVEVOL® Pro Summary is below.



Netflix, Inc. (Netflix), incorporated on August 29, 1997, is an Internet subscription service streaming television shows and movies. The Company’s subscribers can watch unlimited television shows and movies streamed over the Internet to their televisions, computers and mobile devices, and in the United States, subscribers can also receive digital versatile discs (DVDs) delivered to their homes.

I found this stock using a real-time custom scan. This one hunts for depressed vols. Much to my surprise, NFLX implied volatility has just fallen below multi-year lows which means the option market reflects that NFLX stock is less risky now than anytime in the last two-years.

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

The two-year NFLX 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 come back story of a lifetime with the stock bouncing back from a low of $53.05 on 9-26-2012 to now nearly 500% that level in less than a year. Oh my how the mighty had fallen, and how mighty the rise is again. Just a breathtaking recovery with an incredible job done by upper management to not go the route of the music industry, friendster, myspace, etc. The innovated and the have been rewarded handsomely for it.

It's this stock rebound that makes the volatility story all the more compelling. Let's turn to the two-year IV30™ chart in isolation, below.



We can see with the implied closing at 35.96%, that NFLX vol is now at multi-year lows. Huh?... Is there less risk now in NFLX shares than there has been in the last two-years? Maybe there is...

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



Across the top we can see that Sep vol is priced to 35.96% while Oct is priced to 37.31%. That Oct vol is the interesting one. If VIX stays at these multi-year low levels then the systematic risk in the market may in fact keep NFLX vol down... But, if Oct (or Sep) show abrupt moves in the market, a 20% VIX isn't exactly hard to grasp, and if that happens, where does vol for the stock up 400% go? I would say, not to multi-year lows... Then again, VIX could go to 10%... or stay right here.

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

Tweet


Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

J.C. Penney (JCP) - Stock at Decade-year Lows; Volatility at Multi-year Highs; Solvency Risk? Is JCP Going Away?

JCP is trading $12.80, down 2.8% with IV30™ up 1.1%. The LIVEVOL® Pro Summary is below.



J. C. Penney Company, Inc. (jcpenney), is a holding company. The Company is a retailer, operating 1,102 department stores in 49 states and Puerto Rico as of January 28, 2012. Its business consists of selling merchandise and services to consumers through its department stores and through its Internet Website at jcp.com.

I found this stock using a real-time custom scan. This one hunts for elevated vols. JCP does have earnings due out on the 20th of this month (after Aug expiry), but the implied is now trading at multi-year highs… Something is afoot and that "thing" maybe solvency risk for JCP.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200

The two-year JCP 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 quite poor returns both over one-year and two-years. The high over this two-year period is in the $43 range and we’re now lookin’ at a $12 stock… icky…

As the stock has been making multi-year lows, the volatility is playing the “opposite game,” now reaching multi-year highs ahead of earnings. Let’s look at the two-year IV30™ chart in isolation, below.



Keep in mind that there are seven calendar days to go before earnings for JCP so the vol levels today will quite possibly be breached for each consecutive trading day ahead of earnings.

Here’s the rub… With all the noise surrounding JCP and an earnings announcement due out, I kind of get the feeling that the vol should be at multi-year highs. I mean, it certainly should be elevated relative to some benchmark. The question becomes “what will be released in the earnings announcement and how much will it move the underlying?” Right now the option market says, “a lot, and a lot.”

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



Across the top we can see that Aug and Sep vol are nearly identical, but of course, Aug represents three (and a half) days. It wouldn’t surprise me to see vol inch closer to triple digits for JCP before the announcement. It also wouldn’t surprise me to see the stock move that much on the news. Ya know… or not…

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

Tweet


Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

BlackBerry (BBRY) - Upside is in Play Right Now, Stock Spikes, Volatility Bounces Hard Off of Lows

BBRY is trading $10.50, up 7.6% with IV30™ up 10.9%. The LIVEVOL® Pro Summary is below.



BlackBerry Limited, formerly Research In Motion Limited, is a designer, manufacturer, and marketer of wireless solutions for the worldwide mobile communications market.

I found this stock using a real-time custom scan. This one hunts for vol gainers on the day. But this is actually a depressed vol note relative to a stock snapping up.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percent Change GTE 10
Average Option Volume GTE 1,200
IV30™ Change GTE 7

The two-year BBRY 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).



So the stock story for BBRY (formerly RIMM) is not good… This was a $140+ stock a few years ago and the rage of new technology. Then it fell to nearly $5 with the risk of obsolescence looming in a very non-trivial way. Then there was the great hope of BBRY v10. That hope has sort of kept the firm going – they are rich with cash, not necessarily rich with product.

But this is a vol story, so let’s turn to a one-year IV30™ chart in isolation below.



We can see that just about a week ago the implied hit an annual low as it drifted down post earnings. But, we can also see a rather abrupt reversal, where the implied has now popped. In the meantime, the stock has gone from ~$8.60 to now ~ $10.50, so a ~25% rise in two weeks. It’s that move in stock with the level of the implied (which even after the recent pop is still in the 24th percentile on an annual measure) that caught my attention. In a sense, it feels like BBRY is back in play – not good or bad, just back to the realm of the unknown. Unknown = risk = higher vol.

Let’s look at the Skew Tab, below.



Even though Aug expiry is in five days, the skew shape in Aug is still noteworthy. We can see substantial upside skew reflecting upside risk (potential) in the immediate-term. The 8.0% rise today in stock is circumstantial evidence that the newly found upside skew risk is in fact an accurate reflection of risk.

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



Across the top we can see the monthly vols are priced to 68.80% for Aug and 61.32% for Sep. I dunno, that Sep vol feels awfully low given both a myopic view of BBRY and a more evergreen view of the market in general. Ya know, or not…

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

Tweet


Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Hewlett-Packard (HPQ) - Volatility Pops to New Annual Highs; Earnings Risk is Elevated Based on Recent Past

HPQ closed Thursday trading at $26.87, up 0.7% with IV30™ popping up 16.7%. The LIVEVOL® Pro Summary is below.



Hewlett-Packard Company (HP) is a provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses (SMBs) and large enterprises, including customers in the Government, health and education sectors.

I found this stock using a real-time custom scan. This one hunts for elevated vols. Now HPQ has earnings due out on 8-21-2013 (AMC), but it has already breached an annual high in IV30™ and we still have two weeks to go before earnings. All this in the face of a VIX spot at 12.73%... Weird…


Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200

The one-year HPQ 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 I see quite noticeably that each of the last four earnings cycles (the blue ‘E’ icon represents earnings) have produced a stock gap. Oddly, the first two were down and the last two were up. The earnings release on 11-20-2012 pushed the stock to an annual low of $11.11. Since then the stock has risen 150% -- so, it’s been an impressive turnaround.

But it’s the volatility that caught my eye, so let’s turn to the one-year IV30™ chart, below.



We can see the spikes from the prior earnings cycles (again, look at the blue ‘E’ icons). But now look at the current vol – it has eclipsed those prior highs and we have quite some time before the earnings announcement. My best guess is that the volatility is elevating so early and so much due to the behavior of stock for the last several earnings reports as well as the meteoric climb since 11-20-2013. In this case, a rising vol to a new high well ahead of earnings does make sense.

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



Across the top we can see that Aug monthly vol is priced to 30.73% while Sep vol (with earnings) is priced to 48.83%. The risk in HPQ is elevating quickly and to new annual highs and given the realities of the stock price movement from recent earnings cycles, I get it… Let’s watch this one into and out of earnings…

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

Tweet


Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.

Tesla (TSLA) - Now a $20B Firm Off of Earnings Blow Out; How Wall St. Absolutely Blew It; But I didn't... And I'm Just a Guy...

TSLA is trading $156.83, up 16.8% with IV30™ down 32.8%. The LIVEVOL® Pro Summary is below.



Tesla Motors, Inc. (Tesla) designs, develops, manufactures and sells electric vehicles and advanced electric vehicle powertrain components.

So there's a lot to say about TSLA. The most pressing is the stock and vol move today off of a blowout earnings report. Interestingly, while all of Wall St. seems to have missed the sales projections, somehow I didn't, and all I did was walk in to a dealership for 10 minutes and speak to a salesman. More on that in a sec... You'll want to read it, trust me...

But first, I did a three-piece story on TSLA recently and have included the links to those three articles below (click on the bolded title to read). You can also see the stock price and volatility levels at the time of those articles.

5-9-2013: Tesla (TSLA) - Earnings Explosion Spectacle Hides Vol Shift -- This is a New Company -- A Paradigm Shift is Complete


5-15-2013: Tesla (TSLA) - May Skew Stays Parabolic; Vol Diff Opens... And Some Stuff You May Not Have Known...


5-29-2013: Tesla (TSLA) - This is a New Company; The Paradigm Shift Continues; Part 3 of 3.


And today the stock is trading ~$155.

So there's no denying it now, TSLA is a big deal.. The market cap is approaching $20 billion. Here's the news from earnings:

---
NEW YORK (TheStreet) -- The thesis on Tesla Motors (TSLA_) changed again last night. Now, the question for investors isn't whether the electric-car manufacturer can be profitable, it's just how profitable it can be.

Tesla, led by CEO Elon Musk, earned 5 cents a share during its second quarter, generating $405 million in sales. The Model S continues to blow past the wildest expectations of industry observers as global deliveries surged in the three-month period to 5,150 units for the quarter.

In contrast, analysts were expecting a loss of 17 cents a share on $383.4 million in revenue for the second quarter.

Source: TheStreet.com via Yahoo! Finance; Tesla's Future Is Now, written by Chris Ciaccia.
---

Interestingly, the note mentions that the 5,150 units sold blew "past the wildest expectations of industry observers." On May 9th, with the stock trading at $70 I said this: "This is a new company, starting today."

But it was the May 15th article that was the most compelling. I wrote:
------
"After I wrote the post on May 9th, I actually walked into a TSLA dealership and spoke to a salesman. He was a shareholder (or so he said). I have no idea if what he said was true, or if it is already common knowledge, but according to him the firm sold 2,600 cars last year, and this year they are going to break 20,000. The cheapest model is $70,000 and the most expensive is $113,00. They are at full capacity -- which according to him was 500 cars per week -- and every car made is to order so production = sales."
------

Note that I said "they are going to break 20,000" units sold for the year. Well, if there are four quarters in a year, that would make 5,000 units per quarter at zero growth. I'm sorry to say, the 5,105 unit number is not a surprise to me and should not have been to anyone else. And, any analyst that would have walked into a dealership would have gotten the identical information I did.

Wall St. absolutely blew this one -- very poorly done. I'm just a guy chatting it up with a salesman. Come on guys, you gotta do better.

OK, off the soapbox, onto volatility. Let's start with the one-year Charts Tab. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



So, yeah, the stock is up HUGE.  A year ago this was a $29 stock and today it's flirting with $160.  And, as I mentioned earlier, we're not talking about a $100MM market cap now worth $700MM, this is now a $20 billion market cap company.

The volatility collapsed after earnings which is normal, and is now trading in the 46th percentile on an annual measure -- feels like right where it should be.  But there is something going on in the volatility, that continues to reflect substantial tail risk.  Let's turn to the Skew Tab, below.



I've just included Aug and Sep.  Even after earnings, Aug vol is still elevated to Sep (and yes I know Aug is expiring in a week and a half). What I do note is the relatively exponential skew of Aug compared to Sep. Or, in English, check out how the upside and downside skew is priced in Aug relative to Sep (green circles highlight it). There is a rather substantial vol difference from the front to the back monthly expiry in the OTM options reflecting much greater tail risk even in the next 10 calendar days.

Given the move off of earnings and just the move over the last year, that makes sense, but it also represents a trading opportunity.  For you risk lovers, a short gamma long vega trade in the OTM skew is up -- but that's a hell of a risk.

I'll conclude with a copy & paste from the article I posted on may 9th ($70 stock):

---
This is called a paradigm shift (well, that's what I call it) -- this company is now seen as a riskier entity. That's not bad news, in fact, for TSLA it's based on extraordinarily good news (earnings results). But TSLA is now a different company... and in this case, good for them... next level please...
---

This is trade analysis, not a recommendation.

Follow @OphirGottlieb

Tweet


Legal Stuff:
Options involve risk. Prior to buying or selling an option, an investor must receive a copy of Characteristics and Risks of Standardized Options. Investors need a broker to trade options, and must meet suitability requirements.

The information contained on this site is provided for general informational purposes, as a convenience to the readers. The materials are not a substitute for obtaining professional advice from a qualified person, firm or corporation. Consult the appropriate professional advisor for more complete and current information. I am not engaged in rendering any legal or professional services by placing these general informational materials on this website.

I specifically disclaim any liability, whether based in contract, tort, strict liability or otherwise, for any direct, indirect, incidental, consequential, or special damages arising out of or in any way connected with access to or use of the site, even if I have been advised of the possibility of such damages, including liability in connection with mistakes or omissions in, or delays in transmission of, information to or from the user, interruptions in telecommunications connections to the site or viruses.

I make no representations or warranties about the accuracy or completeness of the information contained on this website. Any links provided to other server sites are offered as a matter of convenience and in no way are meant to imply that I endorse, sponsor, promote or am affiliated with the owners of or participants in those sites, or endorse any information contained on those sites, unless expressly stated.