YELP - Elevated Vol Nears All-time High as Stock Drops

YELP is trading $19.21, down 1.4% with IV30™; up 2.8%. The LIVEVOL® Pro Summary is below.



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This is a vol note on a stock that is hitting all-time highs in the implied as the stock is dipping. Let's start with 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 far the equity price has declined of late. On 8-8-2012, this stock closed at $26.46 and as of this writing the stock is down more than 27% from that level. Earnings were announced on 8-1-212 (AMC) and the next day the stock did rally up from $18.82 to $22 or ~17% on that news. The 52 wk range in stock price is [$14.10, $31.96].

Turning to the vol side we can see how elevated the implied got into earnings, then how it came in after (normal behavior). What's interesting (and caught my attention) is the vol rise of late. On 8-15-2012 the IV30™ closed at 70.47% (and the stock closed at $22.11). As of this writing the implied is over 114%, or a rather awesome 62% rise in less than two weeks. The 52 wk range in IV30™ is [50.42%, 115.96%], putting the current level right on that annual high.

Let's turn to the Skew Tab to examine the month-to-month and line-by-line vols for the front two expiries.



While there is some bumpiness to the curves, the shape is basically normal. I do note how elevated the front month is to the back. The option market reflects elevated risk in the near-term (to Aug expiry) relative to the intermediate term (out to Sep expiry). This is a bit odd in that Aug vol does have a tendency to sort of fall asleep as late Summer can be a slow month, while early Fall (Sep) does tend to show higher vol. As a proxy, the VIX Aug options reflect ~18.30%, while Sep options reflect 22.85%.

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



We can see across the top that the monthly vols are priced to 117.23% and 99.44% respectively for Sep and Oct expiries. Something is a foot for YELP...

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