Tuesday, September 27, 2011

Maxim Integrated Products (MXIM) - Elevated Vol; Depressed Earnings Vol Phenomenon

MXIM is trading $24.84, up 3.1% with IV30™ down 3.0%. The LIVEVOL® Pro Summary is below.


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Maxim Integrated Products, Inc. (Maxim) designs, develops, manufactures and markets a range of linear and mixed-signal integrated circuits, commonly referred to as analog circuits, for a large number of customers in diverse geographical locations.

This company has a similar vol term structure phenomenon as the earlier post on SAP. You can read that blog here: SAP (SAP) - Elevated Vol, Depressed Earnings Vol Phenomenon

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).

The stock price is at around the same levels as late Jun/early Jul and has popped the last two days with the market rebound. The implied is trading above both the short-term and log-term historical realized vols, or in English, by that comp, vol is elevated. Specifically:

IV30™: 40.85
HV20: 35.64
HV180: 36.16

Let's turn to the Skew Tab, and uncover the same vol phenomenon as in SAP.

The front month ATM is actually just below the back, but to the downside puts we can see elevated vol in Oct to Nov. The last two years SAP has had earnings on 10-28-2009 and 10-27-2010. With an Oct 22 expiration, a reasonable bet is that SAP will have earnings after the Oct options cycle and in Nov.

Allow myself to introduce myself... Austin Powers... anybody? No?.. Ok... Here's a line from the last blog:
"This is a great example of a phenomenon that’s starting to become common in companies with earnings due out in the Nov cycle [but have elevated vol in Oct] due to the "fear factor" in Oct and the recent wild swings."  Yeah, what he said.. Or, what I said... Whatever...

Let's finally look to the Options Tab for completeness.

Possible Trades to Analyze
A bunch of interesting positions to analyze sort of pop out at me in this one (and SAP). They all surround selling Oct and buying Nov in the downside. Straight calendars, ratio calendars (selling more), and diagonal calendars all purchase the Nov earnings vol and sell the elevated non-earnings Oct vol for more (more vol, not more in $).

NB: The 52 wk range for MXIM is [$17.02, $27.90].

This is trade analysis, not a recommendation.

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