Liz Claiborne (LIZ) - Stock and Vol Explode on Buyout Firm News

LIZ is trading $13.47, up 13.9% with IV30™ up 44.2%. The LIVEVOL® Pro Summary is below.



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Liz Claiborne, Inc. (Liz Claiborne) designs and markets a portfolio of retail-based brands, including JUICY COUTURE, KATE SPADE, LUCKY BRAND and MEXX.

This is a vol and stock note on "not quite a rumor." Let's start with the news and then below that, the tick chart (minute-by-minute) for the day. The top portion is the stock price, the bottom is the front month vol.

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Liz Claiborne sought $20/share from buyout firms, WSJ says

Company not contemplating sale but PE firms have held talk, WSJ says.

Source: Theflyonthewall.com via Yahoo! Finance Liz Claiborne sought $20/share from buyout firms, WSJ says
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I've circled the rather obvious spike in the stock and front month vol. It looks like vol rose to over 200% in Apr for a heartbeat and has fallen back don to Earth, but still a 44.2% rise for the day.

The stock hit $15.39, then came back down abut half way. As I'm writing this, LIZ is flirting with $14 and IV30™ is up to over 78% (a 65% pop).

Let's turn to the Skew Tab to see how each month (and each strike) is reacting to the equilibrium shifting news.



The front shows a huge upside skew (OTM calls vol rise as strikes rise). The entire month is well elevated to the back months and since the back two don't show as pronounced an upside skew, that vol diff to the OTM calls has gotten pretty large. Can you imagine if there were weekly options expiring today in this name? That would be awesome...

Also noteworthy -- the next earnings release for LIZ is likely in the May cycle and outside of Apr (that's a projection). So, ya know, May has a volatility event embedded in the options that Apr might not.

Next, the Charts Tab (six months) 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 how the underlying has risen from ~$4 to now over $13 in less than six months... Whoa!... The 52 wk range in stock is [$4.02, $12.74], so the level today has breached an annual high (if it closes here). 

On the vol side, we can see how the stock was essentially falling asleep up until today.  The HV20™ hit 29.17% and the HV10™ is just 17.44%. See.. asleep. Then, there was today. Note that HV calcs are close-to-close, so those HV values will rise on Monday's chart as long as the stock stays elevated today. Interestingly, the vol level is still just in the 53rd percentile (annual), even after the climb today.

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



Apr, May and Jul are priced to 78.95%, 62.855 and 56.565, respectively. Note that the Jul 18 calls are priced to ~$0.40 mid-market... This was a $4 stock a few months ago, so, wow...

This is trade analysis, not a recommendation.

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Potash Corp. (POT) - Depressed Vol into Earnings

POT is trading $45.59, up 1.3% with IV30™ down 6.9%. The LIVEVOL® Pro Summary is below.



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Potash Corporation of Saskatchewan Inc. (PCS) is an integrated fertilizer and related industrial and feed products company.

This is a vol note with earnings approaching. The Charts Tab (six months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



Although the stock charts loos roller coaster like, if you look at the vertical axis scale, the stock hasn't been "crazy volatile" over the last three months. The HV60™ (60 trading days ~ three months) is 31.43% which is well below the longer-term HV180™ of 42.58%. Looking to the implied, we can see that IV30™ is depressed relative to HV20™ and HV180™ as well as its own history. The col comps are:

IV30™: 31.17%
HV20™: 40.30%
HV180™: 42.58%

Further, the 52 wk range in IV30™ is [27.53%, 64.21%] putting the current level in the 10th percentile (annual). One note of interest, yesterday Stifel Nicolaus upgraded POT to a buy. I can't find any news that would drive the vol down nearly 7% today.

Let's turn to the Skew Tab.



I've included four expiries -- the one that ends today, the next weekly, and the Apr and May monthly cycles. Note that May (light blue) is priced above Apr monthly (green) -- that's a reflection of earnings which is likely in the May cycle but outside of Apr given the last two years reporting dates in calendar Q2 (4-29-2010, 4-28-2011). In fact, Livevol® has confirmed the 4-26-2012 date. Note that the weeklies are priced above May, however.

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



For the four expiries illustrated above we can see 36.54%, 34.07%, 31.17% and 32.93%, respectively. For the last two earnings cycles, IV30™ reached 43.79%, 35.13%. Odd how low that second number is... Note how similar it is to the IV30™ right now (taking into account that it will rise into earnings).

This is trade analysis, not a recommendation.

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Pre-Market/Post Market: 3-30-12

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Humana Inc. (HUM) - Supreme Court Decision Looms; Industry On Hold, Vol Pops

HUM is trading $89.77, up 1.3% with IV30™ up 10.8% as of ~10:50am EST. The LIVEVOL® Pro Summary is below.



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Humana Inc. (Humana) is a health care company. Humana operates in three segments: Retail, Employer Group, and Health and Well-Being Services. The Company offers a range of insurance products and health and wellness services that incorporate an integrated approach to lifelong well-being.

This is a vol note surrounding the increasingly contentious and interesting pending Supreme Court Ruling on President Obama’s healthcare bill. Here’s a news snippet that focuses on the impact to health insurers. If you haven’t read up on the bill and pending ruling yet, I highly recommend checking that out as well.

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It can be difficult to read the tea leaves after a Supreme Court debate, but the arguments over the law this week appear to point to a favorable situation for health insurers, Bernstein Research analyst Ana Gupta argues.

Based on commentary from the justices, it looks like the law’s requirement that individuals purchase health insurance will be shot down, Gupte argues. But in that case, the court will also probably invalidate the portion of the law that makes insurers price policies the same whether you are sick or healthy (the part that allows people with pre-existing conditions like cancer to get access to affordable coverage). That would be a net positive for insurers, Gupte says.

The court does not look [particularly] likely to strike down the entire law, a scenario that the insurance industry would be against. That might be somewhat [positive] for insurers, but could create uncertainty, Gupte argues.

Gupte sees the managed care sector rallying after the decision in the case is handed down in June.

Source: Barron’s via Yahoo! Finance, Insurers Look Poised to Benefit After Obamacare Arguments: Bernstein, written by Avi Salzman
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Either way it sounds like a vol event is embedded in these companies and a potential move may be coming. Let’s turn to the Charts Tab (six months), 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 nearly 50% rise from six months ago. But, it’s the vol that caught my attention. The pop today is rather expected – but check out the level relative to its past.

The 52 wk range is [20.72%, 51.00%], putting the current level in the 10th percentile. Odd given the potential for an abrupt reaction off of the news. Then there’s the issue of earnings, which are due out on 4-30-2012. Hmmm.

Let’s turn to the Skew Tab, below.



We can see a rather noticeable “normalcy” to the skew shape across all of the front expiries. In other words, the option market doesn’t reflect any kind of bias. I do note that May is elevated to the other two expiries because of earnings, but that vol diff is relatively muted.

To understand what option skew is and why it exists you can read this post: Understanding Option Skew -- What it is and Why it Exists

Let’s turn to the Options Tab for some more detail.



I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. Across the top, we can see that while Apr is priced to 23.68%, May is priced to 27.24% (and Aug is 26.75%). That 27.24% level would be in the 24th percentile – so still depressed relative to its own history.

In English, the May vol which has both this industry wide event and a company specific earnings release, is priced in the bottom quartile (annual) of vol (relative to its own history). One huge note here, this is an event stock as long as the decision isn’t released, which means back month vega can be very risky – all of the premium can be lost in a heart beat. That premium is at high risk in a very short period of time.

This is trade analysis, not a recommendation.

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Pre-Market/Post Market: 3-29-12

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Amylin Pharma (AMLN) - Takeover Sees "Fortuitous" Trade One Day Before

AMLN is trading $22.72, up 47.6% with IV30™ up 32.4%. The LIVEVOL® Pro Summary is below.



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Amylin Pharmaceuticals, Inc. (Amylin) is a biopharmaceutical company focusing on the diabetes and other metabolic diseases through the discovery, development and commercialization of medicines.

This is an interesting order flow note -- some skills of "premonition" may be at work... or not. Let's start with the news that's pushing the stock up nearly 50%:

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NEW YORK (AP) -- Shares of Amylin Pharmaceuticals Inc. jumped Wednesday on a report the diabetes drugmaker recently turned down a buyout offer from Bristol-Myers Squibb Co. worth $3.5 billion.

Bloomberg reported that Bristol-Myers proposed to buy Amylin for $22 per share. It said there have been no talks between the companies since the initial offer earlier this year. Bristol-Myers Squibb and Amylin declined to comment on the story, which cited anonymous sources.

Source: AP via Yahoo! Finance -- Amylin jumps on word of offer from Bristol-Myers
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Tricky... Here's where it gets interesting. Eddy Altamirano drew my attention to this curious trade -- many thanks to him. Below, I've included the Options Montage and day's biggest trades from yesterday, on close.



Focus in on the Apr 21 and Apr 24 calls. These are baby options with nickel and $0.02 bids, respectively (as of yesterday). The largest trade was a 1 x 2 for even (OK, not quite). In English, someone bought 1 Apr 21 call for every 2 (OK 2.31) Apr 24 calls they sold. Recall that the stock closed at $15.39, yesterday.

Let's turn to the Options Tab, today.



I've highlighted the options in question as of today. Using the prices (mid-market) above, that spread on a 2.31:1 ratio is actually a small loser right now. But, and this is a huge one, if the stock does close below $24 (say $22 -- the bid price), this trade is a gigantic winner. It was done for a credit and would be a 2218*100*$1 = $221,800 winner (excluding the opening credit). If the stock goes to $24, it's a $665,400 winner (excluding the opening credit). The trade is safe until $27 -- so there is upside room.

In any case -- it's an interesting trade in and of itself -- even more so with a 50% pop on a takeover bid the very next day.

This is trade analysis, not a recommendation.

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MBIA Inc. (MBI) - Elevated Vol is Depressed; Earnings Vol Spikes, New Price Target for 100% Rise

MBI is trading $9.66, up 2.1% with IV30™ up 5.7% as of ~10:45 EST. 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.

This is a vol note – rising vol to be specific. News today has pushed the vol higher (above the historical measures). Let’s first check out the research note today:

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MBIA (MBI: NYSE) By MKM Partners ($9.51, March 27, 2012)

We are initiating coverage of MBIA with a Buy rating and a 12-month price target of $18.

Our Buy rating is predicated on our belief that MBIA's (ticker: MBI) transformation litigation will either be upheld by the courts or see the remaining plaintiffs withdraw from the two primary cases challenging this transaction. If/when this occurs (and a separate case, Aurelius, is settled/dismissed), National Public Finance Guarantee (National) will become a separate entity […]

Source: Barron’s via Yahoo! Finance -- MBIA May See Catalyst Soon
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Just to be clear, the $18 price target is essentially a 100% higher target. Let’s turn to the Charts Tab (six months), 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 rather large move up between 11-26-2011 ($7.26) and 1-11-2012 ($13.32) of over 83%. The stock has come down off of those highs, and recently has found a sort of quit period with HV10™ at 35.77%.

On the vol side we can see a few interesting phenomena:
1. The implied has traded above the HV20™ and HV180™ for nearly all of the last six months other than a few days in the recent past.

2. The implied is now trading above both historical vol measures with the IV30™ pop today. The vol comps as of this writing are:

IV30™: 68.96%
HV20™: 37.54%
HV180™: 59.63%

3. Finally, while the implied has returned to its “standard” elevate level relative to the historical measures, it’s still depressed relative to its own history. The 52 wk range in IV30™ is [52.92%, 133.28%], putting the current level in the 19h percentile.

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



We can see that May is elevated to the other expiries and that’s due to the earnings release due out in the May cycle. Apr does show a parabolic shape reflecting tail risk in both directions in the near-term.

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



I wrote about this one for TheStreet (OptionsProfits), so no specific trade analysis here. The vols across the top demonstrate 61.82%, 90.31% and 78.63% for Apr, May and Aug, respectively. This is a clear example where the earnings event has a huge impact on the reflected risk in the options. In English, the May vol is 50% higher than Apr.

This is trade analysis, not a recommendation.

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Pre-Market/Post Market: 3-28-12

To get an e-mail alert when a new pre-market report is posted please send an e-mail to support (support (at) livevol.com) with "Pre-market" in the subject line.

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American Int'l Group (AIG) - Stock Rises, Vol Pops, Skew Bends, Calls Trade

AIG is trading $30.12, up 3.6% with IV30™ up 14.4%. The LIVEVOL® Pro Summary is below.



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American International Group, Inc. (AIG) is an international insurance company, serving customers in more than 130 countries. AIG companies serve commercial, institutional and individual customers through property-casualty networks of any insurer.

This is an order flow note along side with some rising vol. I actually found AIG because of its vol pop today. Let's start with the news:

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Shares in American International Group, Inc. were up 2.2% this morning at $29.70 after analysts at Deutsche Bank predicted the insurer’s stock buyback program may be larger and more rapid than is implied by the current share price.

Source: Forbes via yahoo! Finance -- Options Players Bet On Big Upside In AIG, Under Armour, written by Caitlin Duffy.
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The order flow has pushed front expiry skew to the upside. The company has traded 91,935 contracts on total daily average option volume of just 18,922, with calls trading on a nearly 10:1 ratio to puts. The Mar (weekly)31 calls have traded more than 12,000x and are pushing skew. The Stats Tab and Day's biggest trades snapshots are included (below).





The Options Tab (below) illustrates that the calls are opening (compare trade size to OI). From what I see, the trades look to be substantially purchases.



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



This is the first part of the vol story which caught my attention. We can see a rather abrupt upside skew in the weeklies. Granted, some of that is artificially elevated due to some cab bids in the OTM calls -- but in general, the shape has certainly changed from a few days ago. I've included the skew chart from two days ago, below.



We can see that two days ago the skew was rather flat -- the news and resulting order flow have had an impact on the skew shape.

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



The second part of the vol story comes from a more holistic view. Check out how depressed the implied is right now relative to its own history. The 52 wk range in IV30™ is [24.41%, 84.91%], putting the current level in the 10th percentile (annual). Obviously AIG's vol has dropped with the rest of the market (read: VIX is 15%). The next earnings release for AIG should be in early May if dates of the last two years' earnings dates (5-7-2010 and 5-5-2011) are a good indication for this year.

It is interesting to note that, unlike a few of the other recent posts, the May vol (earnings vol) is essentially the same as the expiry before (Apr). The 31.92% in May would still be in 12th percentile (annual). One caveat here, the implied got sorta wildly elevated around Oct of 2011. Other than that "moment" in time, the implied peaked at ~60%.

This is trade analysis, not a recommendation.

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Titanium Metals (TIE) - Takeover Rumors Spike Skew; Calls Trading

TIE is trading $13.98, up 1.7% with IV30™ up 1.9% as of ~10:50am EST. The LIVEVOL® Pro Summary is below.



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Titanium Metals Corporation (TIMET) is a producer of titanium melted and mill products. The Company has titanium production facilities in both the United States and Europe.

This is a vol and order flow note based on a rumor. Here’s the rumor:

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09:52 EDT Rumor: Titanium Metals strength attributed to renewed private equity speculation

Source: Theflyonthewall.com via Yahoo! Finance.
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On the news, the company has traded over 7,000 contracts on total daily average volume of just 1,878. Calls have traded on a 8.4:1 ratio puts, or in English, of those over 7,00 contracts, just 762 have been puts. The Livevol® Pro Stats Tab and day’s biggest trades snap are included below.





The Options Tab below demonstrates the Apr 14 calls are the most active with over 4,500 trading on OI of 1,525. The majority of those orders look like purchases and the size relative to OI indicates opening orders. Basically, the order flow is buying into this “rumor.”



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



The shape of the front two months do show an upside skew to the OTM calls, which is to say, the order flow (OTM call purchases) has pushed the vol up. I took a look at the historical skew – namely 3-21-2012 and have included that chart below.



What we can see here is how the skew has a “normal” shape – with the vol dipping from the OTM puts to the ATM options and eventually to the OTM calls. This is the evidence that the order flow has affected the skew.

Looking back to the skew chart for today, we can also see how depressed the Apr vol is to May (and Jun). For the last two years, the calendar quarter two earnings date was 5-5-2010 and 5-5-2011, so it’s a reasonable bet that the next earnings release for TIE will be in the May expiry but outside of Apr. The options reflect that vol event and thus have pushed the back two months above Apr.

The final piece of this puzzle, and for me the most interesting, is the vol on a more holistic level. I have included the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).



I wrote about this one for TheStreet (OptionsProfits), so no specific trade analysis here. On the stock side we can see a rather flattish period of late. The 52 wk range in stock price is [$13.08, $20.00], which means the current level is near an annual low.

But check out the vol – the implied is depressed to its own history. In fact, with a 52 wk range of [26.53%, 67.94%], the current level falls in the 5th percentile.

Looking back to the Options tab (at the top), we can see the monthly vols are 26.97%, 33.19%, 32.55% for Apr, May and Jun, respectively. That 33.19% would be the 16th percentile for IV30™, so still depressed even with earnings approaching (and a “rumor.”)

I do note the reaction today in the underlying., which is to say, the lack of reaction. The stock has been stuck in a quiet period and HV20™ is in fact lower than IV30™ at 23.53%. The HV30™ is just 20.97%.

This is trade analysis, not a recommendation.

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