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RadioShack Corporation (RadioShack) is engaged in the retail sale of consumer electronics goods and services through its RadioShack store chain. The company is up today on some interesting news. I’ve included a snippet below:
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Shares of Radio Shack (RSH) are up $2.37, or 18%, at $15.47 after the company this morning missed Q2 revenue and earnings estimates, but said it inked a deal to bring Verizon Communications (VZ) phone offerings to its stores.
Q2 revenue fell 2% to $942 million, yielding EPS of 31 cents a share. Analysts on average had been expecting $1.03 billion and 37 cents per share.
Verizon will provide the stores with both postpaid and prepaid wireless offerings, Radio Shack said, staring September 15th, 2011. At the same time, Radio Shack will stop selling T-Mobile products, which makes sense, given the intended acquisition of T-Mobile by AT&T (T).
Source: Barron’s, Tech Trader Daily, written by Tiernan Ray
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So a shortfall (or miss) in earnings is more than made up for with the Verizon deal. The company has traded over 22,000 contracts on total daily average option volume of just 3,280. Calls have traded on a 3.1:1 ratio to puts. The Stats Tab and Day's biggest trades snapshots are included (below).
Let’s turn to the Skew Tab to examine the vols by strike by month.
We can see the Aug upside vol (the 17 calls) is elevated to the surrounding strikes and especially to the Sep 17 calls. We can also see that the ATM vol in Aug hasn’t quite come crashing down given the nature of the earnings release – which in fact was a news release.
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 pop today off of the news. HV20 is calculated close-to-close, so that blue line will in fact pop up tomorrow and get very close to the IV30™. Having said that, the IV30™ will still be quite elevated relative to the HV180 – the long-term realized historical stock vol.
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 can say that what caught my attention was both the skew and the vol in Aug, which has remained elevated to the long-term trend even after this slight dip today off of earnings.
This is trade analysis, not a recommendation.
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