H&R Block (HRB) - Vol Breaches Annual High Well Ahead of Earnings; What's Coming?

HRB is trading $28.45, down 1.2% with IV30™ up 5.0%. The LIVEVOL® Pro Summary is below.




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H&R Block, Inc. (H&R Block) has subsidiaries that provide tax preparation and banking services. The Company's Tax Services segment provides assisted income tax return preparation, digital tax solutions and other services and products related to income tax return preparation to the general public primarily in the United States, and also in Canada and Australia.

This is a vol note, specifically an elevated vol note. And yes, I know that HRB has earnings due out in a week from today -- but this is still worth the analysis -- I'll show you why.

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



On the stock side we can see a really nice price appreciation Y-O-Y, with the stock rising from $15.53 (so nearly a double in a year) and still paying a nice little divi. We can also see that on the last earnings release (the blue "E" icon) that the stock popped on the news. Good for HRB shareholders and HRB management.

But this is a vol note, and an interesting one. Let's take a look at the one-year IV30™ chart, below.



We can see where the vol peaked for the prior four earnings cycles. Now look at the vol trend of late. With still a week to go before the release, the implied is absolutely exploding. On 5-15-2013 (so, three weeks ago), IV30™ was priced at 34.99%. Today we see a 48.28% level or a 38% rise. The 52 wk range in IV30™ is [16.60%, 46.00%], so we're obviously well into annual high territory. As earnings approaches, the implied should continue to rise and I wouldn't be surprised to see a level well over 50% ahead of the earnings release.

In English, the option market reflects more risk in HRB now than it has in a year and that risk will quite possibly continue to rise.

Finally, let's turn to the Options Tab.



We can see Jun vol is priced to 53.36% and Jul is priced to 42.95%.  That vol diff is due to earnings -- my focus is (and will be) the implied up to earnings.

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ExactTarget (ET) - Takeover -- Lucky Trade or Cheater?

ET is trading $33.71, up 52.5% with IV30™ down 63.9%. The LIVEVOL® Pro Summary is below.




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ExactTarget, Inc. is a global provider of cross-channel, interactive marketing software-as-a-service (SaaS) solutions. The Company’s solutions provide marketers with a suite of integrated applications. The Company’s suite of cross-channel, interactive marketing applications include e-mail, mobile, social media and sites, is built on its flexible multi-tenant SaaS platform.

So, first the news -- it's a takeover:

---
Salesforce.com (CRM) has signed a definitive agreement to acquire ExactTarget (ET) in a cash deal worth approximately $2.5 billion. Under the terms of the deal, each ET shareholder will receive $33.75 per share in cash.

The deal is expected to close by the end of July 2013.

Source: PR Newswire, Reuters
---

Unfortunately, this is one of those notes where I see some unusual option activity ahead of the news and it's suspicious... Let me build the story.

First, let's look at the average option volume for ET over the last three-months:



So, we can see the firm averages 271 calls traded a day, and that number includes the anomaly I am about to demonstrate.

Let's look to a chart of option volume over the last two-years.  The scale is linear -- the spike in May 10. 2013.



We can see pretty clearly that May 10th was a wildly high option volume day for ET -- more so than any day in the last two-years by a large amount.  And, what was the volume? How about 4,411 calls and 28 puts.  Specifically, the May 20 calls traded 2318 times and the Jun 20 calls traded 1,643 times on OI of just 43.  The purchase price for those Jun 20 calls was ~$1.30, though they ranged from $0.90 to $1.60.  The may 20 calls were purchased for ~$0.50.

Now those May options expired before the takeover news, although they did increase in value to $2.50 -- so about a 400% gain, but, ya know, coulda just been some spec buying (or whatever).

The story is those Jun 20 calls, and here's why.  I have included the ET Options Tab from today, below.



Those $1.30 calls are now worth ~$14.00 making the gain on thoe options well over $1,000,000 and then look at the OI of every other option (calls and puts) for every other expiration and every other strike in ET.  What do ya know, the Jun 20 calls are the largest of any other.

This feels awfully suspicious, though I'm not screaming bloody murder -- there are several circumstances that make this trade just "a trade," with no impropriety.  Having said that, it compelled me to write about it, which means it compelled me to tell you about it.

Good trade... right?

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Iron Mountain (IRM) - Vol Explodes 60% in Ten Days; Stock Turns Down. Will History Repeat Itself? Huge Call Buying in Jun.

IRM is trading $35.07, down 2.1% with IV30™ up 25.1%. The LIVEVOL® Pro Summary is below.




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Iron Mountain Incorporated (Iron Mountain) is engaged in storing records, primarily paper documents and data backup media, and provide information management services. The Company offers records management services, data protection and recovery services and information destruction services.

I found this stock using a real-time custom scan. This one hunts for vol gainers on the day.  But this is also an order flow note -- check out the volume in the Jun 37.5 calls -- those are opening purchase orders .

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 goal with this scan is to identify names with rising IV30™ that also have 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).

The six-month IRM 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 how IRM hit a recent high of $39.71 in early May, which is in fact a multi-year high. But then… the stock started falling. In the last two weeks (ish) the stock is down 12% and the vol has decided it’s time to explode.

I have included a six-month IV30™ chart in isolation, below for a more myopic view of the vol.



Check out that explosion in the implied. On 5-22-2013 the IV30™ was 22.77%. Today we’re looking at an IV30™ of over 37%, or a 60%+ rise in just about ten days. That’s certainly an abrupt and noteworthy move especially considering that earnings were released on 5-1-2013, so this vol rise and stock drop are not associated with that news event.

IRM does have a history of huge vol and stock moves – they’re just hidden in a short-term six-month chart. The 52 wk low in stock price is $23.40 and the 52 wk range in IV30™ is [15.84%, 72.46%]. Look at that high number of 70%+ implied. In English, IRM has seen substantially higher vol (risk) so this pattern of late may have legs.


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



Across the top we can see the monthly vols are priced to 40.11% in Jun and 34.75% in Jul. Again, if this stock drop and vol rise continues, it’s not impossible to see a doubling of vol in a relatively short amount of time based on the history of this stock over the last year.

Also, as i mentioned up font, check out the volume in the Jun 37.5 calls (the green number to the left of that strike).  IRM averages 2,558 calls traded per day in total and has seen over 8,000 Jun 37.5 calls alone traded already.

 This one goes on the watchlist…

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Uni-Pixel (UNXL) - Exploding Vol; Collapsing Stock in a Magic Trick - That No One Gets to See

UNXL is trading $15.62, down 21% with IV30™ up 42.3%. The LIVEVOL® Pro Summary is below.




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Uni-Pixel, Inc. (Uni-Pixel) is a production-stage company delivering its Performance Engineered Film (PEF) to the display, touch screen and flexible electronics markets. The Company has developed thin film high volume roll to roll or continuous flow manufacturing process. It focuses to sell its films as sub-components for use in liquid crystal display (LCD) as a back light film and active film sub-component.

UPDATE: Getting many sources telling me that the firm is now showing demonstrations of the technology at several conferences. Check @Livevol_Pro Twitter or StockTwits feed for details.

So this one, is a really interesting story, aside from the stock and vol stuff 'n stuff. It's like a super secret magic trick that no one is allowed to see other than a select group of people who don't seem to agree on what they are seeing.  Here's the scoop on UNXL in general and then in particular to day's stock collapse and vol explosion which has put the implied at all-time highs.

UNXL has a new product called UNI-Boss, which is a touch screen technology. Ok... You can see a little video demo of the product on their website... OK... But, check this out:

---
One of the most interesting things about UniBoss is that very few people have seen the product outside of the limited presentation environment the company controls. Most investors have just seen the demos on the company's website and a few have visited the company. Almost nobody has actually gotten to play with the demo system and the company has, for about a year, refused to give investors samples.

Source: Seeking Alpha via Yahoo! Finance: Uni-Pixel: A Picture Is Worth A Thousand Words, written by Seth Shaw.
---

I repise this quote: "the company has, for about a year, refused to give investors samples."

The author of that article goes on to say that they are one of the few to have actually seen and touched this new product and they have really interesting snapshots to demonstrate the usage. UNXL has sub $1MM in revenue but has a market cap of $200MM which at one point very recently was more than $400MM. This is a spec stock on a spec product which could be huge... or not...

Let's turn to the two-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 an entity that was trading below $5, to trading over $41 on 4-17-2013.  Since then, the stock has imploded down ~55% in a month and a half.

The headlines driving the recent drops are many, here's a taste:

---
May 22, 2013

Cowen & Co.’s Rob Stone this morning reiterates an Outperform rating on shares of touch sensor technology maker Uni-Pixel (UNXL), writing that the 26% plunge in the shares Friday was “significantly overdone,” prompted, he thinks, by a product delay that doesn’t change the company’s fundamental advantages.

Responding to rumors on Friday that a delay in Microsoft‘s (MSFT) next update to Windows 8, Windows 8.1, might postpone shipment of Uni-Pixel’s technology, Stone contends that there’s no change that he can see to the company’s business:

It is logical for the PC OEM partner to delay a new product launch within months of an operating system update. Nevertheless, investors may wonder if there could also be an underlying issue with UniBoss production readiness. However, UNXL stated that first production samples have already shipped, and a payment from the ecosystem partner indicates continued progress.

The “PC OEM partner” is not specified, but as I wrote on Friday, analysts have speculated it is Dell (DELL).

Source: Barron's via Yahoo! Finance: Uni-Pixel: Sell-Off on Rumors Overdone, Says Cowen, Position Intact, written by Tiernan Ray.
---

The news today, oddly, is... I have no idea...

The stock has been falling apparently b/c of the above news / worries. And how much is the worry?... Look at the bottom portion of the Charts Tab. The red line is the IV30™, and we can see how the implied has exploded ever since options started trading in this name. The first day of options trading (12-13-2012) the implied closed at 107%. Today, we're looking at nearly 180%. In English, the option market reflects nearly a double in the future risk of the firm as the stock price has risen and then collapsed. All on a spec product that basically no one gets to see... It's a magic trick! But it might be a real one...

Let's quickly turn to the Skew Tab, below.



We can see how elevated Jun is to Jul.  To me this vol divergence is simply a reflection of the fact that no one has any idea what's going on.  We don't get to see the product... There may even be an earnings event in Jul, though it's not a sure thing.  There may be more news about the product and its distribution, but there may not be.  The stock price drop could be a symptom of short-sellers, but it might not be.  The stock could pop back to the $40 range or fall back sub $10, or it might stay here.  All this in a very short-time period.

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



Across the top we can see the monthly vols are priced to 179.77% for Jun and 153.85% for Jul. The Jun07 weeklies are priced just below 200% vol.  So, the option market reflects extreme risk in the equity price in the short-term, and a bit less moving out to the intermediate- and long-term.  We'll see...

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Smithfield (SFD) - Pre-takeover Trades Seem Lucky; In the bad Way... How to Make $1MM in a Week

SFD is trading $32.55, up 25.3% with IV30™ down 64.8%. The LIVEVOL® Pro Summary is below.




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---
UPDATE (2:36 PM EST): With the stock now trading $1 higher, the profit in eight days is just over $1,000,000 or 1,150% in eight days.
---

Smithfield Foods, Inc. produces and markets a variety of fresh meat and packaged meats products both domestically and internationally. It operates in four segments: Pork, Hog Production, International and Corporate, each of which consists of a number of subsidiaries, joint ventures and other investments.

This is a very quick note on what appears to be highly suspicious trading in a takeover name.. yet again, the takeover includes a Chinese public company. First, the news moving SFD today:

---
Chinese meat producer Shuanghui International Holdings is looking to purchase Smithfield Foods (NYSE:SFD) for $4.7 billion in a move to feed China’s growing demand for pork.

Should the deal get past what’s likely to be heavy regulatory scrutiny, it could become the largest Chinese takeover of a U.S. company. The deal would be a landmark move in China’s efforts to expand its booming economy outside the country’s borders. Shuanghui has offered to pay $34 a share for Smithfield, an offer that’s 31 percent more than Tuesday’s closing share price.

Source: WALL ST. CheatSheet via Yahoo! Finance: Smithfield’s Big Leap: This Little Piggy Goes to China
---

So, OK, a takeover. SFD has averaged ~1,400 call options traded a day over the last three-months. But, on May 21st (eight days ago), the Jul 29 and Jul 30 calls traded ~1,200x and 1,500x respectively -- both were opening purchases. I have included the Time & Sales Tab from Livevol Pro for that day and those calls, below.





We can see the Jul 29 calls were purchased for ~$0.40 and the Jul 30 calls were purchased for ~$0.25.

Let's turn to the options tab as of right now.



The Jul 29 calls are worth ~$3.60 and the Jul 30 calls are now worth ~$2.60.  That would be a total of an $85,000 investment that now shows a paper gain of ~ $750,000 or an 860% gain in eight calendar days.

How fortunate...

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

TSLA closed Tuesday at $110.33, up 13.7% with IV30™ up 20.6%. The LIVEVOL® Pro Summary is below.



Tesla Motors, Inc. is an electric vehicles and components manufacturer.

This is a follow up to two recent posts, one written on May 9th (three weeks ago) and the other on May 15th (two weeks ago):

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...

I have included the symbol summaries at the time of the original posts:

5-9-2013


5-15-2013


Unbelievably, from that post three weeks ago, the stock is up another 50%; just incredible. Here are a few snippets from that post where I claimed that TSLA had turned into a "different" company in the eyes of the market; that the risk paradigm had changed and we could see it just after earnings were released.

---

We can see that while May vol is down 18.3 vol points, Jun vol is up 1.2 vol points... yeah, earnings are out, yet the second month shows higher vol... as does Sep, Dec, Jan '14 and Jan '15. Yeah, across the board outside of the front month, the option market reflects greater risk in TSLA stock from the short-term to the multi-year long term.

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...

---

Interesting that I used the phrase "next level" as the stock is now up 50% in three weeks after more than doubling in the first five months of the year. This was a $35 stock to start the year and is now trading well above $100.

Let's take a look at the two-year chart for TSLA as of the close on Tuesday (5-28-2013). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



We can see the meteoric rise, and the even more abrupt move of late in one direction : "stock up". TSLA is now a almost a $13 billion market cap firm. Here's another snippet, this one from the post two weeks ago:

---
One quick update before we get going... 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.

Further, at this point TSLA has one version -- one car -- in nine colors (or whatever). They are introducing a new model and... a right hand sided version of the current model (yeah, that would mean Europe). He also said the cars have ~470 HP -- or essentially, they are electric Lamborghinis with 300 miles to the battery charge which costs ~$9 when on absolute empty to recharge (in 8 hours).
---

Now the price move feels quite "bubbly" -- not that TSLA isn't absolutely killing it on the operational front (and earnings front), but my goodness the rise of late doesn't feel driven by fundamentals (it's neither steady but upward sloping, nor is it one big pop) but rater momentum (several consecutive weeks of upward movement). I just wonder, will this company become the next GM (the good GM, not the bad GM)?

I have included the one-year IV30™ chart in isolation, below.



We can see the pattern I made reference to in the earlier posts -- namely, even after earnings, the implied has started to climb again. In my opinion that means the firm has moved into a new risk paradigm -- i.e. a higher risk firm. Could it just be short-term? Yeah, could be. Could it just be put buyers (to hedge) and call buyers (to spec) as the stock leaps? Yeah, could be. Do I think that's the only part of the story? No, I don't. And why not?... Again, it's the longer-term implied vols that have my attention.

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



Across the top we can see tat Jun vol is in the 90% range and rose nearly 17 vol points today (5-28-2013), alone. But look at Jul and Sep (and even Dec and Jan '14). All above or near 80%. Keep in mind, as of 5-5-2013 (so 23 calendar days ago), all of those monthly vol levels (including Jan '14) would have been above the annual high in IV30™. Again, the firm is ow different -- changed... like I wrote about AAPL.


4-23-2013
AAPL - Earnings Preview – Some Things You May Know, and Some You Do Not"

4-18-2013
Apple (AAPL) - This Just Isn't the Company it Used to Be... And it Never Will Be Again."

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

12-10-2012
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

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

But this time, the stock is rising... a lot...

Hello TSLA, where are you going now?...

This is trade analysis, not a recommendation.

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Cobalt Int'l (CIE) - Vol Breaches Multi-Year Lows; Vol Rises Monotonically in Future

CIE is trading $26.69, up 0.8% with IV30™ up 5.9%. The LIVEVOL® Pro Summary is below.



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Cobalt International Energy, Inc. is an independent, oil-focused exploration and production company with a salt prospect inventory in the deepwater of the United States Gulf of Mexico and offshore Angola and Gabon in West Africa.

I found this stock using a real-time custom scan. This one hunts for depressed vols. What I note specifically about this name is that the vol is now breaching multi-year lows.

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

The two-tear CIE 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 incredible run up in the price from Dec 2011 to Feb 2012. In that three-month(ish) period the stock rose from a low of ~$8.80 to a high of $31.70 or a 260% rise. Since then, however, the stock has found a sort of quiet0period . In fact, one-year ago the stock closed at $23.23.

But, this is a vol note, so let’s take a closer look at the IV30™ in a two-year isolated cart.



Check out that drop in the implied. It has fallen from highs of over 115% to now multi-year lows in the 33% range. It’s that vol level that caught my eye especially considering the industry.

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



Across the top we can see the monthly vols are priced to 30.88% for Jun, 38.37 for Jul and 46.97 for Oct, so an interesting monotonic increase vol as we go further out. A big part of that vol increase is due to earnings releases, but still, the option market seems to be picking up on his depressed short-term vol. Very interesting vol evolution and price discovery…

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MBIA (MBI) - Vol Implodes to Multi-year Lows; Is This a New Company Now that BAC Settlement is Over?

MBI closed on Thursday at $14.80, up 1.2% with IV30™ down 4.8%. The LIVEVOL® Pro Summary is below.




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MBIA Inc. (MBIA) together with its consolidated subsidiaries, operates the financial guarantee insurance businesses in the industry and is a provider of asset management advisory services. These activities are managed through three business segments: United States public finance insurance, structured finance and international insurance, and advisory services.

I found this stock using a real-time custom scan. This one hunts for depressed vols. But what we see here on the vol side is truly breathtaking.

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

The two-year MBI 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 the price has risen from just under $9 to now just under $15 in two-years. More myopically we can see that massive gap up recently on 5-6-2013 from $9.83 to $14.29 or a 45% rise in one day. Here's the news that drove that stock reaction:

---
Shares of bond insurer MBIA soared Monday on news that it has reached a settlement with Bank of America in a long-running dispute over who would be on the hook for faulty mortgage securities issued during the U.S. housing boom.

MBIA will receive $1.6 billion in cash from Bank of America and a $500 million line of credit as part of the settlement, which awaits approval from New York state regulators, the companies announced Monday.

Source: CNN Money via yahoo! Finance: MBIA soars 45% on reports of BofA settlement, written by Chris Isidore.
---

So that was hugefor MBI, no doubt. But, let's take a closer look at the vol. I have included the two-year IV30™ chart in isolation below.



We can see a multi-year high in the implied of over 130% and as of this writing (close on Thursday), the options reflect the lowest risk in two-years with IV30™ closing at just over 40%. Wow...I know earnings just came out, and I know they are now cash rich, solvency isn't an issue, blah, blah, blah, but that is some low vol for MBI.

Of course, there is totally reasonable argument that MBI, now that the BofA case is settled, is a totally different entity. Literally, totally different risk paradigm now-- where solvency issues are a thing of the past, and the firm can now be judged on it's business model rather than it's liquidity crunch. it's an interesting perspective either way:
(1) MBI vol is waaaaay too low
(2) We have no idea what MBI vol should be, and perhaps it's more like a 20%-30% vol firm now that this news is done and dealt with.

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



Across the top we can see the monthly vols are priced to 40.04% for Jun and 39.99% for Jul. So, this is kind of the new normal for MBI, I guess... I guess... I guess?

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Saks Inc (SKS) - Cheater or Shrewd Trader? 600% in 29 seconds.

SKS is trading $15.67, up 14.6% with IV30™ up 40.6%. The LIVEVOL® Pro Summary is below.



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Saks Incorporated is a department store retailer. The Company, and its subsidiaries, is engaged in the operation of Saks Fifth Avenue (SFA) stores and SFA e-commerce operations (Saks Direct), as well as Saks Fifth Avenue OFF 5TH (OFF 5TH).

This is a very quick note on some suspicious trading... By suspicious I mean thousands of call purchases in the front month 30 seconds before the close yesterday. And I do mean literally 30 seconds before the close.

Many thanks to Doris Frankel from Reuters for the heads up on this one.  If you don't follow her, you are missing out.  For that matter, the same goes for Cecile Vannucci, Nik Gammeltoft and Jeff Kearns from Bloomberg and Kaitlyn Kiernan at Dow Jones.  You should be reading their stuff daily IMHO.

First, the news moving SKS:

---
Saks Inc. shares surged 14% to $15.58 on Wednesday after reports surfaced late Tuesday that the high-end department store chain has hired Goldman Sachs to explore strategic options, including a potential sale.

Source: MarketWatch via Yahoo! Finance: Saks explores a sale; how much is it worth?, written by Andria Cheng.
---

OK, here's the pre-market close trading from yesterday in the Jun 13 and 14 calls. Note the time stamps (EST):





Uh huh....

And here is the Options Tab right now.



So the June 14 calls went from $0.30 to $1.85 and the Jun 13 calls went from ~$0.85 to $2.70.  That's more than 6x and 3x the purchase prices, respectively purchased 21 seconds pre-close in the Jun 14 calls and anywhere from 31 - 50 seconds pre-close in the Jun 13 calls. OK...

The question remains, was this a cheater or a very shrewd trader that was reading the headlines and digesting them faster than everyone else?  Usually when I ask that question I'm being facetious, this time, I actually mean it -- it's ambiguous.  Check out the news from the NY Post -- their website has a story posted 3 min after the close yesterday... Hmmm...


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UPDATE: It looks like the NY Post did tweet a message with the news 8 minutes before the close, so this was in fact a shrewd trader. Very well done and very legal.
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Rackspace (RAX) - Stock Down 50% on Back-to-Back Earnings Collapses, But What About the Vol?

RAX is trading $38.56, up 1.5% with IV30™ up 7.9%. The LIVEVOL® Pro Summary is below.




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Rackspace Hosting, Inc., is the open cloud company. The Company offers a diverse portfolio of cloud computing services, including public, dedicated and private cloud, and hybrid hosting.

I found this stock using a real-time custom scan. This one hunts for vol gainers on the day. I note this stock actually not so much of the vol pop today, but b/c the vol is so low relative to its annual history while the stock has been cascading lower. So this is a vol pop note on a depressed vol stock.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percent Change GTE 9
Average Option Volume GTE 1,200
IV30™ Change GTE 7

The two-year RAX 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 abysmal return since the stock hit a multi-year high in late Jan of this year. Since then the stock has fallen from over $81 to now $38.66, or a 52% drop in five months. We can see two large gaps down in that short-time period, both right after earnings releases. I do note that consecutive earnings releases have resulted in a large stock drops.

But then we look at the implied vol (the red curve in the bottom portion of the chart) and note how depressed it is to its own history as well as how depressed it is to the two historical realized vol measures (HV20™ in blue and HV180™ in pink).

I have included the two-year IV30™ chart in isolation, below.



Here’s what surprises me. While it’s normal that vol rises and then falls into and out of earnings, this is not a “normal” situation. The stock continues to fall off of bad news from earnings in the trading following the news and has continued to fall (excluding today) from its $80 high price. The IV30™ is now trading in the 22nd percentile with respect to the last year – in other words, the vol is depressed to its own history. In my mind, the implied is remarkably low given the recent stock movement and uncertainty (i.e. gaps down off of earnings reflect “surprises” = risk).

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



Across the top we can see Jun vol is priced 44.42% and Jul vol is priced to 41.21%, so Jul vol is even lower than Jun. That feels… low, right?... or not?

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