Millennial Media (MM) - Vol Explodes into Multi-year High Territory; Stock Down 70% in Two-Years with Earnings Out Soon

MM is trading $6.21, down 3.0% with IV30™ down 0.8%. The LIVEVOL® Pro Summary is below.



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Millennial Media, Inc. (Millennial Media) is a mobile advertising platform company. Millennial Media technology, tools and services help developers maximize their advertising revenue. The Company’s technology and data platform, known as MYDAS, determines in real-time which ad to deliver.

I found this stock using a real-time custom scan. This one hunts for elevated vols. This is a very compelling vol story where the implied is now trading fantastically above multi-year highs with earnings still quite some time away.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percentile GTE 80
Average Option Volume GTE 1,200

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated to its own annual history (at least in the 80th 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 two-year MM 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 an abrupt loss of shareholder value – this was an $18.66 stock two-years ago and is now trading at about a 70% discount to that. I also note the huge gap down off of earnings on 2-20-2013 when the stock dropped from $14.33 to $8.95 in a single day.

But, this is a vol note, so let’s turn to the two-year IV30™ chart, below in isolation.



Here’s the story. While MM has earnings due out on 5-8-2013, the vol is already way into multi-year high territory. Given that earnings are still three weeks away, I expect that vol number to rise quite a bit more, unless the vol is rising due to an event outside of earnings. The blue “E” icons denote earnings dates, and we can see very clearly how much higher the vol is today than in prior earnings cycles.

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



Across the top we can see May vol is priced to 104.05% while Jun is priced to 85.33%. That vol diff of course is due to earnings. This is a very compelling vol story where the implied is now trading fantastically above multi-year highs with earnings still quite some time away. The last earnings release and really the performance of the stock over the last two-years give reason for the elevated vol. But should it be this elevated?... I dunno, I guess we’ll see…

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