Thursday, December 6, 2012

LinkedIn (LNKD) - Vol Nears New All-time Low; Should it?


LNKD is trading $108.95, up 1.1% with IV30™ unched. The LIVEVOL® Pro Summary is below.



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LinkedIn Corporation (LinkedIn) is a professional network on the Internet with more than 90 million members in over 200 countries and territories.

I last wrote about LNKD on 8-14-2012, noting how low the vol was. You can read that post here:
LinkedIn (LNKD) - Should Risk be at Lowest Levels... Ever?.

I've included the Symbol Summary from that date, below:



As the title postulates, I wondered if the vol for LNKD should have been at an all-time low. Apparently, it should have been, as the stock has moved $4 and the implied is even lower today (see top Symbol Summary).

I found LNKD again today b/c of its low vol -- using a real-time custom scan that hunts for depressed vols. I ask again, should LNKD vol be this low?... Maybe the answer is yes again... or maybe six vol points lower and out of the summer doldrums is the time that vol will rise (or stock will move more than the implied).

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

The goal with this scan is to identify short-term implied vol (IV30™) that is depressed to its own annual history (at most in the 10th percentile). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), and I want a minimum vol level so I don't pick up any boring ETF’s (or whatever). The stock price requirement helps me identify names that have enough strike prices to trade or spread.

The one-year LNKD 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 rather quiet period from Aug until now, although there was a peak into the mid $120's in late Sep / early Oct.

In order to get a better look at the vol, I have isolated the one-year IV30™ chart, below.



We can see the extreme peaks into earnings (which is normal), and the troughs that have formed after earnings. The noteworthy trend is that the troughs keep getting lower. It's the value today that caught me eye. The 52 wk range in IV30™ for LNKD is [34.56%, 91.29%], putting the current level in the 3rd percentile (annual).

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



Across the top we can see the monthly vols are priced to 35.73% and 36.58% for Dec and Jan, respectively. While the Dec vol staying low is a reasonable result, I keep pointing to the fact that the Fiscal Cliff and then the return to focus on Europe (after the Fiscal Cliff) are both due out in the Jan options cycle. And while Christmas and New Year's are in Jan expiry (vol lowering events), almost any company hitting annual lows in vol right now feels a bit... weird... Let's see what happens to LNKD this time...

This is trade analysis, not a recommendation.

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