Chico's FAS (CHS) - Call Buying, Vol Rising

CHS is trading $12.32, up 2.0% with IV30™ up 10.7%. The LIVEVOL® Pro Summary is below.



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Chico’s FAS, Inc. is a specialty retailer of private branded, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items under the Chico’s, White House / Black Market (WH/BM) and Soma Intimates (Soma) brand names.

This is an order flow note, based on what seems to be a rumor of a breakup. Let's start with the news snippet:

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Chico's FAS (NYSE:CHS): Option volume 693 percent above average. Investors bought the November 14 calls for $0.20 to $0.25 amid rumors that Pershing Square wants to break up the company. CHS rose 1.82 percent to $12.30.

Source: Top 10 list of unusual option activity, Option Monster, written by David Russell.

For the record, these are Livevol® scans that Option/Trade Monster re-distribute.
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CHS has traded 8,125 contracts on total daily average option volume of just 1,170 with calls trading on a 6:1 ratio to puts. It's the Nov 14 calls showing the most action, trading nearly 5,000 contracts -- substantially purchases. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls are mostly opening (compare OI to volume). When looking down the entire option chain for CHS, the largest OI I see is 3,343, so these 5k (ish) are substantial.



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



The skew looks generally unaffected. CHS earnings the last two years have been on 11-18-2009 and 11-17-2010 and expo this year is 11-19-2011. But, as far as I have found, there are some places projecting CHS earnings after Nov expo.

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



With the vol popping today, the implied is now trading above the two historical measures. Specifically:

IV30™: 52.57
HV20: 47.19
HV180: 42.27

Interesting that the vol is rising that substantially as the stock sits still (ish).

This is trade analysis, not a recommendation.

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VIX - Is VIX Sending a Signal?

VIX spot is quoting $34.47, up small with IV30™ down 0.3%. The LIVEVOL® Pro Summary is below.



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This is a quick note on VIX and SPY that I noticed. Let's start simple, a 3 month chart of VIX and SPY is included below (VIX -- red, SPY -- yellow).



I've circled the peaks and troughs of the VIX and the corresponding troughs and peaks in SPY. Basically, SPY down means VIX up -- no great revelation there.

I've noticed in the last few days a persistent VIX in that it seems to go up but not down. Today, while the SPY is up ~0.5%, VIX is still up. That's kinda spooky... But here's something more spooky:

The last time VIX was at this relative level (relative to SPY) in the last three months, SPY was ~4% lower. Here's that same chart illustrating where SPY "should be."



Not spooky enough... How about this:

The last five times VIX was at this level, VIX IV30™ was:

90.86
95.71
91.39
91.51
91.31

Today the vol of vol (IV30™ of VIX) is over 100. So, in English:

1. The VIX has been going up but not down.
2. The SPY is elevated relative to the VIX using the last 3 month as the benchmark.
3. The implied of VIX is elevated relative to the last several times it has seen this spot level.

I've already said this on Twitter, but if Germany isn't just using some brilliant negotiation tactics but in fact is legitimately that pessimistic of a real deal coming out from this weekend's meetings, it feels like the market could be ready to... ya know, not do well... a lot.

This is trade analysis, not a recommendation.

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DELL - Stock Drop, Vol Rise, PC Market Alive?

DELL is trading $14.98, down 5.8% with IV30™ up 10.8%. The LIVEVOL® Pro Summary is below.



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Dell Inc. (Dell) is a technology company that offers a range of technology product categories, including mobility products, desktop personal computers (PCs), software and peripherals, servers and networking products, storage and services.

I found DELL today because of it’s vol pop. There has been some interesting news in the PC market (yeah, there’s still a regular old PC market) based on INTC’s most recent earnings report. Here’s a great review from The Motley Fool:

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[INTC] Non-GAAP earnings jumped 33% year over year to $0.69 per share on $14.3 billion in revenue -- a 29% annual boost. Both numbers were comfortably higher than analyst targets [...]

[T]he real shock is the source of this stellar performance. Yep, Intel leaned on regular old PC systems more than on servers or tablets.

[...]Maybe Hewlett-Packard really should hold on to its market-leading PC division after all. Perhaps Dell should reverse course and refocus on consumer systems in the end.

[T]he magic isn't happening in America. The consumer growth is happening elsewhere. "China was up 12%, India 21%, Turkey 14%, and Indonesia 23%," Otellini explained. "China is now the No. 1 PC consumption market in the world, while Brazil has become No. 3."

Source: The Motley Fool, written by Anders Bylund
http://www.fool.com/investing/general/2011/10/19/intel-proves-the-doubters-wrong.aspx
---

Interesting...

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



Two things that jump out at me:
1. The stock drop today.
2. The vol rise today.

I believe earnings are due out at the end of the Nov expo cycle (on or around 11-15-2011). But, that elevated vol relative to the two historical measures is more a result of today’s stock move than the earnings event.

Let’s turn to the Skew Tab.



A normal lookin’ skew chart with monotonic increases to the front from the back. Also, a similar shape across all months. It’s that elevated Oct vol (one and half day options) that has me interested. The ATM vol in Oct is a touch over 57.

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



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. But, I will say that owning Nov options for less vol than Oct is an interesting position to examine given that earnings should be due out in Nov. Having said that, examining a one and a half day option is really less about vol and simply turns into a one day bet on gamma. Given the 6% decline today, and the real possibility that the market has a spasm in the next day (one way or the other), the short gamma is risky.

On a side note, keep an eye on the EU meeting this weekend. If Germany’s tough talk isn’t just brilliant negotiation tactics, the market could be down...limit... Or not... VIX is 36 and the market is almost unched today -- hmm...

This is trade analysis, not a recommendation.

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New Gold (NGD) - Vol Explodes on Call Trading in Nov

NGD is trading $10.95, down 3.1% with IV30™ jumping up 42.6%. The LIVEVOL® Pro Summary is below.



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New Gold Inc. (New Gold) is an intermediate gold producer with a portfolio of global assets in the United States, Mexico, Australia, Canada and Chile.

This is an order flow note, and a pretty simple one at that. Call buying -- and lots of it on one line. NGD has traded 62,130 contracts on total daily average option volume of just 2,635. Calls have traded on an 8.1:1 ratio to puts with the Nov 11 calls trading over 48,000x. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size). Given the vol movement (i.e. up), these feel like purchases. Earnings are due out in the Nov cycle, so this may be an earnings bet. The stock volume is right at the daily average with an hour and a half to go, so higher than usual, but not crazy higher considering ~50,000 50 delta calls have traded.



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



I'm surprised that the vol in the 11 strike in all months (and Nov in particular) isn't elevated and gives me pause as to whether these are two sided (buyers and sellers). We can look to the OI tomorrow and see if it's gigantic (near the trade volume). The elevated Nov vol relative to Jan'12 is due to earnings (at least in part).

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



If we rewind a day we would have seen an implied trading squarely in between the short-term and long-term historical vols with a calm(ish) stock chart. As of today, though, we can see the IV30™ explosion. The 52 wk range in IV30™ prior to today was [42.76, 72.19]. Obviously with the implied over 80, we're at a new annual high. In fact, the last time IV30™ was this high was late Jan of 2010 when this was a $3.64 stock.

Possible Trades to Analyze
It hasn't gone unnoticed that the vol is up 50% (or whatever), but the stock is just kinda sitting there. The Nov 11 straddle is worth ~$2.05 and the 52 wk range in stock price for NGD is [$6.41, $14.15] with that high hit in early Sep. In English, this stock can move, the vol reflects the highest risk in the last two years and it's already ~30% off of an annual high reached 2 months ago. With earnings coming up, is $2 fair value? I dunno... Seems like it's not insane expensive... No?... Then again, buying earnings premium can be icky.

This is trade analysis, not a recommendation.

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Focus Media (FMCN) - Front Month Downside, Back Month to Earnings

FMCN is trading $24.19, down 1.9% with IV30™ down 1.8% as of ~11:45am EST. The LIVEVOL® Pro Summary is below.



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Focus Media Holding Limited (Focus Media) operates an interactive digital media network. The Company offers interactive digital media platforms aimed at Chinese consumers.

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



We can see that abrupt stock drop in Sep and an abrupt (but not equal) rebound in Oct. On the vol side, we can see the implied spiked at around the same level as the stock moved, but now has dipped a bit of late.

Let’s turn to the Skew Tab, below.



We can see a monotonic month-to-month vol increase from the back to the front. It’s the front month vol (expiring in 2.5 days) that caught my attention, while also noticing that earnings may be after the Nov cycle – meaning that’s elevated vol relative to a month (Jan) with options.

Let’s turn to the Options Tab for completeness.



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. I will say that while the Nov vol is elevated to Jan and very well may not have earnings, it’s still right in between the HV20 and HV180 – so, in a simplistic view, it is about fair value. That Oct downside vol has my attention more than anything and owning Nov in some way isn't necessarily owning expensive vol.

This is trade analysis, not a recommendation.

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Aruba Networks (ARUN) - Elevated Vol, Earnings Patterns

ARUN is trading $23.48, down 1.7% with IV30™ up 6.1%. The LIVEVOL® Pro Summary is below.



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Aruba Networks, Inc. connects local and remote users to corporate information technology (IT) resources via distributed enterprise networks.

This is a vol note, but it surrounds earnings and a company that tends to move more than the implied vol prices. Let's start with the Charts Tab (1 year), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).



I've circled the last four earnings releases and the corresponding stock moves. More on that in a sec... On the vol side we can see that the IV30™ pop today has pushed the implied further above the two historical measures. Specifically:

IV30™: 80.77
HV20: 61.19
HV180: 73.16

Let's dig into some earnings stats. Below I have included the stock price and ATM straddle values one day before earnings and the one day after.



We can see the stock has moved on average 11.7% (absolute value -- calcs not shown), and more importantly, the ATM straddle has gained value 6/8 cycles on an average 37.2% one day rise. The last three earnings releases have shown a 23.6%, 99.2% and 71.0% one day increase in that one day straddle.

Let's turn to the Skew Tab.



We can see the Nov option vol is priced above Oct and Jan. Last year ARUN had earnings on 8-26-2010 and then on 11-17-2011. This year, ARUN had earnings on 8-25-2011. Hypothetically that could mean earnings will be announced before the Nov expo cycle (11-19-2011), though it's certainly not a sure thing. The elevated vol in Nov does reflect the expectation that earnings are in fact out in the Nov cycle.

This is an interesting one because while the vol on earnings has been priced too low recently, the overall vol is elevated to the historical measures. Or, in English, the vol is either a purchase or sale. How helpful was that?...

Let's turn to the Options Tab for completeness.



As of right now the ATM Nov straddle is worth ~$4.60 or 19.6% of the $23.48 stock price. Also interesting is the pricing of the wings. The 52 wk range in ARUN stock price is [$16.20, $36.40] but the Nov 14 puts are still worth $0.20 (mid-market). Hypothetically a Nov 14/16 1x2 (sell 2 of the 14 puts against a long 16 put) can be done for a credit and is safe to $12. That doesn't mean it's a do, it just means the vol is priced in for a potential big move again. This stock may be worth watching as earnings approach -- perhaps some other ratios or spreads become tasty.

This is trade analysis, not a recommendation.

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China Life Insurance (LFC) - Volatile Volatility

LFC is trading $36.29, down 5.5% with IV30™ up 12.1% as of ~11:30am EST. The LIVEVOL® Pro Summary is below.



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China Life Insurance Company Limited is an insurance company. The Company operates its businesses through individual insurance business, group insurance business and short term insurance business, which provides individual life insurance, group life insurance, casualty insurance and health insurance products and services, such as financing insurance, children's insurance, endowment insurance and protection insurance, among others.

LFC showed up on a custom scan I use to find rising vols on the day – with IV30™ up over 12%, LFC is near the top of the list. Let’s start with the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™- red vs HV20 - blue vs HV180 - pink).



From the top portion we can see the stock was trading over $57 about six months ago and now is in the mid thirties. It’s unbelievable to not that this stock was trading at a low twenty IV30™ for several months and that implied was actually above the short-term historical realized vol for the same period. In English, this stock was moving at about fifteen vol for several months. Yeah, fifteen vol in China...

Starting in early August the stock started moving with several times that vol, hitting as high as ~64 in HV20. The IV30™ has hit as high as 61. As of today, the vol difference between the implied and the two historical measures has opened up fairly significantly. Specifically:

IV30™: 51.08
HV20: 40.79
HV180: 32.46

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



The skew has a normal shape, pretty really. The second month is elevated to the third likely due to an earnings release due out in the Nov expiration (I think).

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



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. But, I will say that ultimately selling elevated vol is a reasonable position to examine, understanding the risks that elevated vol reflects. But, given the incredible vol increase from just six months ago in LFC and the ocean of opaqueness coming from China, this one feels kind of... icky... No?...

This is trade analysis, not a recommendation.

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Goldman Sachs (GS) - Earnings Vol and Preview

GS is trading $95.82, down 0.9% with IV30™ up 0.9%. The LIVEVOL® Pro Summary is below.



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The Goldman Sachs Group, Inc. (Goldman Sachs) is a bank holding and a financial holding company.

GS has earnings due out tomorrow BMO. For an interesting article on the possibility of a reported loss, you can check out this link from Zero Hedge which is based on a very well reviewed Bloomberg article:
Is Goldman About To Report Only The Second Loss Since Its 1999 IPO?, submitted by Tyle Durden.

I'll stick to vol analysis and honestly, it's pretty simple. Vol is high -- really high... or is it?  Let's start with the Charts Tab (two years). 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 the valuation has been cut in half over the last two years -- I'm guessing you already knew that. On the vol side, check out how high IV30™ is relative to anything over the time period. NB: The earnings periods are denoted with an "E" icon on the stock chart.

To further the analysis, let's focus on the vol chart by itself, with that same "E" icon embedded where appropriate.



Even though the IV30™ is off the extreme highs from a couple of weeks ago (ish), the implied is still substantially above any other earnings period. In English, the option markets reflects higher risk in this earnings report than at anytime prior in the last eight quarters (including seven earnings cycles).

Let's look to the Options Tab to turn the vols into actual option prices.



With expiration just a few days away, we can essentially attribute the option prices to the earnings risk. Here's what caught me off guard. The Oct 95 straddle is priced at ~$6.20... Or said differently, a two standard deviation move is ~$12.50. Hmmm...

Is there really only a 2.5% chance that GS is above ~$108 or a 2.5% chance that GS is below ~$84 off of earnings? I dunno... Would you bet that GS will move more or less than $6.20 from $95 by expo? Either way, would you have imagined that was the highest it's been for any earnings release over the last two years (in percentage terms)?...

This is trade analysis, not a recommendation.

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Research in Motion (RIMM) - Elevated Vol, Parabolic Skew

RIMM is trading $22.75, down 5.1% with IV30™ up 0.7%. The LIVEVOL® Pro Summary is included below.



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

This is a vol note, but keep in mind, at it's annual high RIMM was a $70 stock. I found it today using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20 LTE 10
HV180 - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 60

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

The RIMM 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).



I've highlighted three stock gaps down. The two most recent were a direct reaction to earnings releases. The last one pushed HV20 up well beyond the IV30™, but has just rolled off that moving average. Now the implied is trading well above both the short-term and long-term historical realised measures (HV20 and HV180).

We can see:
IV30™: 80.52
HV20: 65.04
HV180: 64.89

Let's turn to the Skew Tab, below, to examine the month-to-month term structure and line-by-line vols.



We can see the ATM vols for Oct and Nov are the same -- it's the OTM options that show a parabolic skew in Oct (which is normal this close to expo).

Let's look to the Options Tab (below) for completeness.



Note how close Oct and Nov ATM vol are priced.

Possible Trades to Analyze
A short-term position to analyze could be selling the front month vol. Covering with the wings is a possibility, but then again, that purchases the most elevated vol on that skew chart. A longer-term position to analyze could be the Nov vol sale and covering with Nov wings.

Alternatively, owning the RIMM vol could be an interesting position to examine given the retail driven months ahead. Perhaps selling the Oct wings to fund a part of the Nov vol is worth examining. Given RIMM's 52 wk low of $19.29, perhaps a ratio sale is worth analyzing as well.

This is trade analysis, not a recommendation.

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Tyco Electronics (TEL) - Order Flow in Calls and Earnings Vol Comp

TEL is trading $33.87, up small with IV30™ up 2.8%. The LIVEVOL® Pro Summary is below.



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TE Connectivity Ltd., formerly Tyco Electronics Ltd., designs and manufactures over 500,000 products that connect and protect the flow of power and data inside various products.

This is another order flow note, heavy to the call side but this time not baed on a takeover rumor, but rather inclusion into the S&P 500. The company has traded over 13,000 contracts on total daily average option volume of just 350. All but 71 contracts have been calls yielding a 188.6:1 call:put ratio. The largest print was this:
"TEL cust bot 9500 oct 35 calls for .3750 vs 33.80 on a 27 delta"
The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls are mostly opening (compare OI to trade size). Considering that the entire OI on all options for TEL is 12,588, the action today in the Oct calls is quite substantial.



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



Interestingly, the skew hasn't really moved much with the Oct 35 strike still quoting at lower vol than the Oct 30 strike. In general, the Oct vol is above Nov. The last earnings cycle on around this time of year last year was 10-28-2010, and before that was 11-4-2009. It's a reasonable assumption that the next earnings cycle for TEL will be after Oct expo (and in Nov). Hmmm...

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



We can see the stock plummeted in late Jul / early Aug but of late has rallied hard. This was a ~$26.50 stock at the low on 10-4-2011 and is now close to $34.

On the vol side, everything looks fairish with IV30™ dipping below the short-term realized historical vol but still above the long-term trend.

Possible Trades to Analyze
Other than working on that Oct 35 call -- either buying the flow or selling at bid prices, the Oct 30/ Nov 30 put spread may be interesting. Selling ~ 15 vol points higher than it purchases, that calendar owns earnings vol for less than non-earnings. Perhaps a ratio is also an interesting position to examine, though the recent realized vol is worth noting (i.e. risky).

This is trade analysis, not a recommendation.

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