Tuesday, April 30, 2013

Post Market Report: 4-30-13

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Pre-Market/Post Market: 4-30-13

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Monday, April 29, 2013

Post Market Report: 4-29-13

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Actavis (ACT) - Takeover Rumors Start the Fever; Vol Explodes 100%; Stock Reaches Annual High.


ACT is trading $106.48, up 5.5% with IV30™ up 95.3%. The LIVEVOL® Pro Summary is below.



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Actavis Inc., formerly Watson Pharmaceuticals, Inc., is an integrated global pharmaceutical company engaged in the development, manufacturing, marketing, sale and distribution of generic and brand pharmaceutical products.

I found this stock using a real-time custom scan. This one hunts for elevated vols.

What’s interesting is that this firm has earnings due out on 5-2-2013 BMO, but the vol explosion and price move have nothing to do with the earnings vol event. This is takeover fever… in a major way. The prior annual high in IV30™ was 31% -- as I’m writing this article the implied is trading just under 42%, now. The prior 52 wk high in stock price was ~$101, and the stock is trading well above that level right now as well.

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

The one-year ACT 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, even before today, we can see a nice appreciation over the last year. One year ago this was a $75.36 stock, so it’s up a lot even before the pop today. I also note the HV180™ (pink curve on the bottom portion of the chart) – that represents the realized historical volatility of the stock over the last 180 trading days, or about nine months. The stock moves at ~20% annualized clip – quite low for a pharma company – although this is a generic pharma company so, it’s not quite as spicy as the normal guys in this industry.

Of course, the real stock story is the pop today on news that over the weekend there may have been discussions about a takeover from Valeant Pharmaceuticals. Couple that with a raised price target from an analyst and you get… today. My source for this news snippet was Investors.com.

Let’s turn to the one-year IV30™ chart to see the incredible vol rise today.



That spike is just vertical. Rumor = 100% pop in IV30™; that’s the equation we’re looking at today. Wow…

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



Across the top we can see the monthly vols are priced to 42.08% in May and 32.32% in Jun. That elevated vol in May is due both to earnings and this takeover news. I do note the rise in vol for Jun and Aug as well (look at the little green numbers in parenthesis under the vol number). Those vol pops are not earnings related, but rather takeover related.

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Pre-Market/Post Market: 4-29-13

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Friday, April 26, 2013

Post Market Report: 4-26-13

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Pre-Market/Post Market: 4-26-13

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Thursday, April 25, 2013

Post Market Report: 4-25-13

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Netflix (NFLX) - Vol Nears Multi-Year Lows as Stock Explodes; Hollywood Take Note -- Another Shot Across Major Distributor’s Bows


NFLX is trading $216.70, down small with IV30™ down 2.7%. The LIVEVOL® Pro Summary is below.



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Netflix, Inc. (Netflix), incorporated on August 29, 1997, is an Internet subscription service streaming television shows and movies. The Company’s subscribers can watch unlimited television shows and movies streamed over the Internet to their televisions, computers and mobile devices, and in the United States, subscribers can also receive digital versatile discs (DVDs) delivered to their homes.

I found this stock using a real-time custom scan. This one hunts for depressed vols. After doing a number of articles on elevated vol, I find this a very compelling story on depressed vol given the incredibly high realized vol of late.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 20
IV30™ Percentile LTE 10
Average Option Volume GTE 1,200

The two-year NFLX 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).




We can see the wild ride in NFLX stock over the last two-years, but really it’s been a five-year ride. A lot of respect has to be levied at the feet of NFLX management for doing such a stellar job of pulling the firm out of what looked to be a hopeless situation just a few months ago. And, on a personal note (and as a professional screenwriter), “House of Cards” was absolutely brilliantly done – an in house NFLX production which has fired a shot back across the bow of the largest content distributors in Hollywood (Sony, Disney, Paramount, Warner Bros, Lions Gate, Fox, NBCUniversal).

NFLX has taken on the industry big boys… again…

I wonder if in a few years, the next time we discuss the most powerful distributors in Hollywood, if NFLX is on the list... At the top...

If we look at the last two earnings cycles (blue “E” icons), we can see the abrupt gaps up on the news – when NFLX reported better than expected results (by a lot).

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



We can see the implied as of today is just above an annual low and quite close to multi-year lows. The vol crush off of earnings is normal and expected. What I do find odd, in this case specifically, is how low the implied has gone after a 25% move up on earnings just a few days ago. Looking to the vol comps, we can see quite a divergence between the implied (forward looking vol) and historical vols.

IV30™: 46%
HV10™: 118% (all earnings based)
Hv20™: 91 (mostly earnings based)
HV30™: 78% (somewhat earnings based)
HV90™: 83%

It’s that HV90™ number that really catches my eye. HV90™ is the realized volatility over the last 90 trading days (which is more than four months). So, the stock has moved at an 83% annual clip over the last four months, but the IV30™ (the option market’s forward looking projection for the next 30 days) is considerably lower. Hmmm….

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



Across the top we can see the monthly vols are priced to 46.38% in May and 44.95% in June. Both feel low… right?

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Pre-Market/Post Market: 4-25-13

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Wednesday, April 24, 2013

Post Market Report: 4-24-13

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Under Armour (UA) - Vol Nears Multi-year Lows; Really?


UA is trading $55.38, up 0.7% with IV30™ down 0.5%. The LIVEVOL® Pro Summary is below.



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Under Armour, Inc. (Under Armour) is engaged in the development, marketing and distribution of apparel, footwear and accessories for men, women and youth. The Company’s products are sold worldwide and are worn by athletes at all levels, from youth to professional, on playing fields worldwide.

I found this stock using a real-time custom scan. This one hunts for depressed vols. This mote is in the opposite vein as some of my prior posts where I was seeing stocks breaching multi-year highs in vol into earnings even as the VIX is at very low levels relative to the last four years. Basically, it's time for a different flavor -- so here we go.

Custom Scan Details
Stock Price GTE $5
IV30™ GTE 20
IV30™ Percentile LTE 10
Average Option Volume GTE 1,200

The two-year UA 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 a nice price appreciation. This was a ~$35 stock two-years ago and is now trading early 60% higher. Well done management. But, this is a vol note, so let's look at the two-year IV30™ chart in isolation.



I have drawn in that horizontal yellow line to clearly mark how low vol is now relative to the last two years. It's not quite at new lows,but it's headed there. Specifically, it's in the 2nd percentile. I note how low the vol is in UA, now that earnings have come and gone, in a world where nothing feels "low risk."

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



Across the top we can see the monthly vols are priced to 30.15%, 31.005 and 30.88% for May, Jun and Jul, respectively. Note the consistency of the vols -- i.e. they're all low relative to the last two years. I'm not making a prediction, I'm just sayin', multi-year low in vols priced through July (and pretty close in Oct)... I dunno....

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Pre-Market/Post Market: 4-24-13

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Tuesday, April 23, 2013

Post Market Report: 4-23-13

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AAPL - Earnings Preview – Some Things You May Know, and Some You Do Not


AAPL is trading $405.70, up 1.8% with IV30™ up 1.8%. The LIVEVOL® Pro Summary is below.



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Apple Inc. (Apple) designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications.

In case you hadn’t heard, AAPL is releasing earnings today, AMC.

I’m, going to show you some things that I see, that perhaps you haven’t – and they matter, a lot.

First, I do remind of the recent four articles I posted on AAPL. I think the titles summarize the articles fairly well. Feel free to click the links to read ‘em.

4-18-2013
Apple (AAPL) - This Just Isn't the Company it Used to Be... And it Never Will Be Again."

1-23-2013
Apple (AAPL) - "Just the Facts Ma'am" -- Well, that Supports the Opinion: "Everything has Changed. The Old AAPL is No More."

12-10-2012
AAPL - Everything has Changed. The Old AAPL is No More. The New AAPL is a Riskier Entity and the Market Doesn't Know What that Means Yet

12-5-2012
Apple (AAPL) - Have We Moved into a Totally New Volatility Paradigm for This Company? Has Everything Changed?

On to today… First, I have included the two-year AAPL 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 AAPL’s incredible fall from the highs of over $700 just ~seven months ago. The firm is down over 40% from those highs or over $200 billion in market cap. I saw a great stat that put the number in context – AAPL has lost the market cap of Google over the last seven months.

OK, but who didn’t know that?... It’s the vol where the picture is drawn and the conclusion is made. Let’s turn to the two-year IV30™ chart in isolation.



I have circled the last seven earnings cycles (plus the one today). Though the pattern is rough, recently it has essentially seen the implied rising to higher levels with each earnings cycle. The option market reflects greater risk in AAPL for each earnings cycle. A fair question is, “is this warranted?”

Here is the resounding yes. Below I have included three charts.

(1) The HV360™ for AAPL vs the HV360 for SPY. HV360 is the historical (realized) volatility of the stock over the last 360 trading days – which is about a 1.5 year average (there are 252 trading days a year).
(2) Same chart, but using HV180™ (~9 month average)
(3) Same chart, but using HV120™ (~half a year average)

You may wonder, “why, Ophir, did you put three charts with three different historical vol measures?” The answer is, because I’m not cherry picking – it’s consistent from a six-month moving average to 1.5 year moving average. This is a real and tangible (and large) risk divergence from the market.

For all the charts, the yellow curve represents the SPY (S&P 500).

HV360™


HV180™


HV120™


We can see for all three time-periods, that as the market realized vol has been declining abruptly (the yellow curve) AAPL’s realized vol has been increasing and diverging immensely from the market. In English, AAPL has become more and more risky, while the market has become less and less risky.

It’s important to understand the context of the rising implied vols in AAPL into earnings. These implieds are rising (from earnings to earnings) while the market is less and less risky. It’s also interesting to see that the implieds (future looking risk) in AAPL are rising as the historical vols (realized vols) are also rising.

So what?...

AAPL has become remarkably more risky in the last two years relative to the overall market. It has gone from the leader in worldwide technology to a laggard in certain areas that they in fact invented (aka iOS as one example). The higher implied vols reflect that risk and they are justified with the massive divergence in the historical (realized vols).

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



We can see the ATM straddle ($405 strike) in the weeklies is pricing in a ~$30 move off of the report (one standard deviation) and a $60 move within two-standard deviations.

Nobody really knows how the market will respond. It feels like AAPL might even rebound big if they can squeeze out any good news (which they very well may). But this is not the same company they used to be. Their leader is no longer with us. And a 40% drop in the long-term is not necessarily the limit to the downside.

As for tomorrow’s reaction to today’s news (earnings), I’d say watch for over optimism and over pessimism. In other words, watch for a big move off of little news, and an even bigger move off of big news. Long-term – this is a risky stock that has diverged so violently from the rest of the market that it must be considered a different entity than it once was.

Caution to all sides and all trades in this one. Not just today, but for the next… forever…

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