Tuesday, December 11, 2012

Phillips (PSX) - Stock and Vol Reach All-time Highs; Earnings Vol Sneaks Lower?... Compelling Vol Phenomenon


PSX is trading $52.90 with IV30™ unched. The LIVEVOL® Pro Summary is included below.



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Phillips 66 is a holding company. The Company is engaged in producing natural gas liquids (NGL) and petrochemicals.

This is an interesting note -- one with elevated vol but the earnings month is depressed to the new annual high in implied. This may be one of those few times were we can analyze selling all-time high vol and purchasing lower vol to cover while owning the earnings event. Tricky...

I found this stock using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20™ LTE 10
HV180™ - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20™) and the long term trend in stock movement (HV180™). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated IV30™ simply because earnings are approaching.

The PSX Charts Tab (six months) 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 basically a straight diagonal line up in price appreciation. Six months ago this was a $32.60 stock and today it's well into the $50's. The all-time range in price for PSX (~7 months) is [$28.44, $54.32], so the company is nearing that annual high that it just recently reached.

On the vol side we can see how just of late the implied has been rising. The all-time range in IV30™ is [25.24%, 40.48%], putting the current level at an all-time high -- as the stock is also hitting an all-time high.

I've included the IV30™ chart in isolation below for a better picture of the recent move up.



Again, we can see more easily how the implied is breaching it's all-time high right now.

Let's turn to the Skew Tab, below. This is where it gets really interesting.



We can see how Dec vol (red curve) is elevated to Jan (yellow curve). What's odd is that I believe the next earnings release for PSX is due out in Jan expiry. This may be one of those few times were we can analyze selling all-time high vol and purchasing lower vol to cover while owning the earnings event.

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



Across the top we can see the monthly vols are priced to 44.02% and 38.84% for Dec and Jan -- again, noteworthy if in fact earnings are in Jan. In either case, that 44% number is an all-time high.

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