Friday, August 30, 2013

Caesars Entertainment (CZR) - Vol Pops as Stock Falls 80%, then Rises 500%; Why is Sep Volatility so Cheap?

CZR is trading $21.77, down 0.32% with IV30™ popping 10.8%. The LIVEVOL® Pro Summary is below.


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Caesars Entertainment Corporation provides casino entertainment services. Its casino entertainment facilities include land-based casinos, riverboat or dockside casinos, managed casinos, combination greyhound racetrack and casino, combination thoroughbred racetrack and casino, and harness racetrack and casino, hotel and convention space, restaurants, and non-gaming entertainment facilities.

First, on a totally random point, shouldn't the firm name be Caesar's with an apostrophe?  What's up with that... Anyway, I digress...

I found this stock using a real-time custom scan. This one hunts for vol gainers on the day. But this note is actually focused on depressed vol and an exploding stock price. CZR is actually the only company to appear on the screen today.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 30
IV30™ Percent Change GTE 10
Average Option Volume GTE 1,200
IV30™ Change GTE 7

The two-year CZR 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 two pieces to a single chart:
(1) The first part sees the stock drop from ~$18 to ~$4.50. So just a cataclysmic implosion with the firm nearing bankruptcy levels.
(2) The rise from $4.50 to now ~ $22, an incredible reversal seeing a stock rise to 550% of its prior value in less than a year.

The stock is now at an all-time high. But this is also a volatility note, so let’s look to the two-year IV30™ chart in isolation, below.

We can see the spike in the implied today, but really, that’s not the story. This stock has seen implied vol over 120% in the last year and now trades at volatility in the 70% range. Given the schizophrenic stock movement over the last two-years, I dunno about 70% vol. That’s just I the 25th percentile for the year and the stock is ripping right now. At the end of June, this was a $12 stock…

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

Across the top we can see that Sep vol is well depressed at 69.39% while Oct and Dec pop over 80%. My focus is on that short-term volatility in the Sep expiry. What’s going on there?

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