Wednesday, January 30, 2013

Facebook (FB) - Should Vol be This Low With Earnings Due in 68 Minutes?

FB is trading $31.20, up 1.3% with IV30™ up 0.5%. The LIVEVOL® Pro Summary is below.


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Facebook, Inc. (Facebook) is engaged in building products to create utility for users, developers, and advertisers.

This is a quick vol note, FB releasing earnings AMC today. The interesting point here is how low the implied is relative to the last earnings reports after a rather abrupt stock price appreciation.

Let's start with the Charts Tab 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 dramatic stock price recovery for FB after the steep fall from IPO. The stock is up ~70% from its lows.

On the vol side we can see the three last earnings releases (highlighted in yellow) and how the vol has been dipping for each one. It's easier to see this phenomenon in a vol chart alone, which I have included below.

It's much easier to see here how the implied has dipped for each of the earnings releases. As of right now, the IV30™ is actually in the 49th percentile (all-time) for FB -- so it is below the 50th percentile and earnings are due out in an hour. Quite compelling.

Finally, let's turn to the Options Tab.

Since FB has weekly options, we can see through the ATM strike ($31), that the options reflect a ~$3.00 move off of the earnings report, or about 10%. Take a look at the stock chart above and see the moves made off of the last two earnings cycles, take into account the run up in stock and then ask yourself, "Should FB implied be lower than the 50th (or 80th) percentile with earnings due out in 68 minutes?" A fair question indeed...

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