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Thursday, March 7, 2013

magicJack (CALL) - Vol Diff Opens, Skew Diverges to Upside... Market Reflects Upside Potential on Earnings

CALL is trading $14.27, up 1.9% with IV30™ up 0.7%. The LIVEVOL® Pro Summary is below.

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magicJack VocalTec Ltd (magicJack VocalTec) is a provider of voice-over-Internet-Protocol (VoIP), the softphone (magicJack PC) and the magicJack products. magicJack VocalTec’s product include magicJack and magicJack PLUS, magicJack PC and magicJack APP.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months. The issue here is not so much the vol diff as earnings are due out in March, but rather the very interesting skew divergence.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.

The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated front month vol simply because earnings are approaching.

Let's turn to the Skew Tab to examine the month-to-month and in this case, the compelling line-by-line vol comps.

So we can see two phenomena here:
1. Clearly Maris elevated to Apr --that is due to earnings.

2. Check out the divergence in skew shape across both months. That upside bend to the Mar skew (which is not present in the Apr skew) reflects greater upside risk (potential) of off this earnings release (per the options market). This is very much in opposition to he last few posts I have done for calendar vol diffs, where the skew shapes have shown beautiful consistency.

Now we can turn to the one-year 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 the Y-O-Y return has been pretty poor with stock closing at $23.64 one year ago -- so it's down substantially.

On the vol side we can see the implied is still trading above both historical realized vol measures, though oddly, it has been dipping as earnings approach. That one I have no real good explanation for.

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

Across the top we can see that Mar is priced to 90.06% vol where Apr is priced to 78.30% or about 12 vol points. Again, that's due to earnings. But, look at that upside skew vol diff. For example, the Mar/Apr 15 call spread shows ~20 vol point diff.

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--- DISCLAIMER --
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Pre-Market/Post Market: 3-7-13

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Wednesday, March 6, 2013

Post Market Report: 3-6-13

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JC Penney (JCP) - Stock Breaches Multi-year Lows, Calendar Vol Opens; Parabolic Skew Reflects Heightened Tail Risk

JCP is trading $14.52, down 3.0% with IV30™ up 0.6%. The LIVEVOL® Pro Summary is below.

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J. C. Penney Company, Inc. (jcpenney), is a holding company. The Company is a retailer, operating 1,102 department stores in 49 states and Puerto Rico as of January 28, 2012.

The stock just came up on a real-time custom scan. This one hunts for calendar spreads between the front two months.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.

The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated front month vol simply because earnings are approaching.

Let's turn to the Skew Tab, below, to examine the line-by-line and month-to-month vols.

I note two phenomena here:
1. Mar vol is elevated to Apr vol across all strikes.
2. Both months show almost identical parabolic skews reflecting heightened tail risk (to both sides).

Now we can turn to the one-year 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 has been on a cataclysm ride for the last year, dropping from $38.47 to now $14.50. Even more troubling is the recent move off of earnings on 2-27-2013 AMC. The stock has fallen from $21.16 in just two weeks. Scary stuff if you look at that stock chart. The stock is now trading at a new multi-year low.

The implied dipped after earnings (which is normal) but has risen of late as the stock continues its free fall. The 52 wk range in IV30™ is [29.38%, 93.58%], putting the current level in the 63rd percentile. That feels low to me... actually, it feels very low to me.

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

Across the top we can see that Mar is priced to 75.30% and Apr to 67.71%.

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Pre-Market/Post Market: 3-6-13

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Tuesday, March 5, 2013

Post Market Report: 3-5-13

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Safeway (SWY) - Vol Rises as Stock Rises; Tug-of-War Between Analyst and Management. Stock Up But Core Profit Down 80% in 4 Years

SWY is trading $24.31, up 1.7% with IV30™ up 11.3%. The LIVEVOL® Pro Summary is below.

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Safeway Inc. (Safeway) is a food and drug retailer in North America. As of December 3 1, 2011, the Company had 1,678 stores. Its United States retail operations are located principally in California, Hawaii, Oregon, Washington, Alaska, Colorado, Arizona, Texas, the Chicago metropolitan area and the Mid-Atlantic region.

This is a fascinating story -- sort of a tug-o-war between an analyst that as some chops and the reality of the stock price movement. SWY came up on a real-time custom scan that hunts for calendar spreads between the front two months. It also comes up on the IV30™ day gainer scan, but whichever scan you like, it's the story that really makes this one interesting.

Before we get to the scan details below, here's the news -- a really nice article from AP that sums up the story:

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NEW YORK (AP) -- A Cantor Fitzgerald analyst said Tuesday that while Safeway Inc. executives may paint a rosy picture when they speak with analysts this week, he's not as optimistic about the supermarket chain's prospects.

Ajay Jain backed his "Sell" rating [] saying that its most recent quarterly results may have given investors the wrong idea.

Late last month, Safeway released fourth-quarter results that were far better than Wall Street expected. []

But Jain said he thinks management's comments at the time created a "major misconception" that Safeway has turned a corner as a result of the program, adding that he expects the company to issue a better-than-expected earnings guidance at its analyst meetings Tuesday and Wednesday.

Jain estimated that operating profit at Safeway's U.S. operations fell close to 60 percent between 2008 and 2012, while core profitability has dropped by more than 80 percent.

"We believe Safeway's U.S. earnings and operating margin trajectory appears to be a highly overlooked issue and should be of great concern to investors," Jain wrote in a note to investors.

Source: AP via Yahoo! Finance Ahead of the Bell: Safeway
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Incredible juxtaposition of nearly new highs in sock price ad rising earnings forecasts but with the reality of "U.S. operations fell close to 60 percent between 2008 and 2012, while core profitability has dropped by more than 80 percent."

Wow...

OK, onto the scan details and some analysis.

Time Spread Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 GTE 8
Average Option Volume GTE 1,000
Industry isNot Bio-tech
Days After Earnings GTE 5 LTE 70
Sigma1, Sigma2 GTE 1

The snapshot of the scan is included (below) in case you want to build it yourself in Livevol® Pro.

The goal with this scan is to identify back months that are cheaper than the front by at least 8 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated front month vol simply because earnings are approaching.

Looking to the Skew Tab (below), we can see the elevated vol in the front month (red line) relative to the second month (yellow line).

We can see that mar vol is priced above Apr vol for all strike prices and further, that the Mar skew shows a parabolic shape reflecting greater two-sided tail risk in the near-term. So here's an example of the stock rising while vol is also rising (per the Symbol Summary above).

Now we can turn to the six-month Charts Tab (below). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Check out the meteoric rise since the start of 2013, with the equity price going from $18.35 to now $24.31 or ~33% in just two months. We can also see the pop off of earnings (the blue "E" icon). The stock closed at $20.13 the day before earnings and is now ~20% higher in three weeks.

On the vol side we can see the vol rise into earnings (normal), then drop after (also normal), but it has now found another leg up, including today's 11.3% pop (which is actually now a 15.6% rise as I write this article). So again, stock rising with rising vol. It does happen...

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

Across the top we can see that Mar is priced to 53.28% while Apr is priced to 38.35%. Note that the vol diff between these months is not due to an earnings event (that already happened a few weeks ago). This is a fascinating tug-of-war IMHO, one that brings to light several interesting positions to analyze in the next few weeks (or days).

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--- DISCLAIMER --
This is trade analysis, not a recommendation.

Legal Stuff:
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Pre-Market/Post Market: 3-5-13

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Monday, March 4, 2013

Post Market Report: 3-4-13

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Omnicare (OCR) - Vol Diff Opens Between Front Two Months; Divergence Grows After Convergence on Earnings

OCR is trading $37.51, up 0.3% with IV30™ up 4.2%. The LIVEVOL® Pro Summary is below.

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Omnicare, Inc. (Omnicare) is a healthcare services company. The Company operates in two primary businesses: Long-Term Care Group (LTC) and Specialty Care Group (SCG).

I found this stock using a real-time custom scan. This one hunts for calendar spreads between the front two monthly expiries.

Custom Scan Details
Stock Price GTE $5
Sigma1 - Sigma2 > 7
IV30™ GTE 30
Average Option Volume GTE 1,200

The goal with this scan is to identify back months that are cheaper than the front by at least 10 vol points. I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume) and enough strikes to spread and thus a minimum stock price. I also require a minimum vol level in order to avoid any boring ETFs (or whatever).

Let’s start with the Skew Tab to examine the month-to-month and line-by-line vols.

We can see how elevated the front is to the back and how the front has a more parabolic skew. In English, the option market reflects greater risk in Mar than Apr overall, but specifically even greater risk to the tails (both sides).

The elevated front vol is not due to earnings as the firm last reported on 2-19-2013. In fact, if we look back on that day on the Skew Tab, after the earnings report was released, we can see that the skews laid right on top of each other. I have included the OCR skew from 2-19-2013, below.

So, again, this vol diff that has opened up well after the fact from earnings, making it quite compelling. Let’s turn to the one-year 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 a reasonable Y-O-Y return with the stock going from $33.91 to now ~$37.50. What is more noteworthy is the climb from $29 in early Jun to $40 in Feb. Then we see a significant dip in equity price after earnings and then just recently (the last four sessions) a small recovery.

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

Across the top we can see Mar vol is priced to 42.51% and Apr is priced to 30.82%. It’s that vol diff that has triggered the scan. Given the recent move down off of earnings and then small rise of late and the complete reversal in the skew levels, this is a very compelling skew opportunity. One worth watching, IMHO.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro

--- DISCLAIMER --
This is trade analysis, not a recommendation.

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

Pre-Market/Post Market: 3-4-13

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Friday, March 1, 2013

Post Market Report: 3-1-13

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Repros Therapeutics (RPRX) - Vol Rising in Gapping Stock; Headed to Multi-year Vol Highs into Earnings... Buckle Up

RPRX is trading $11.88, up 1.1% with IV30™ down 0.7%. The LIVEVOL® Pro Summary is below.

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Repros Therapeutics, Inc. is a United States-based company that develops products and services for the management of reproductive health.

This is a vol note in a gapping stock -- specifically an elevated vol note even tough earnings are due well after Mar expiry (but in Apr expiry). Let's start with the Charts Tab (one-year), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Note the gaps in the stock:
5-9-2-12 ---> 5-11-12: $4.18 to $7.80 = + 87%
8-16--12 ---> 8-21-12: $9.23 to $11.24 = + 22%
11-13-12 ---> 11-15-12: $13.82 to $12.34 = -11%
01-25-13 ---> 01-28-13: $18.61 to $11.11 = -40%
02-20-13 ---> 02-21-13: $10.18 to $12.69 = +25%

The Y-O-Y change has been from $4.18 to now $11.88 or +184%... in the lyrics of Adam Sandler, "not too shabby." The point of course is that this stock can move huge, and often times it is based off of earnings news (note the blue "E" icon).

But this is a vol note, so let's turn to an isolated one-year IV30™ chart, below.

Check out the incredible rise in the implied over the last few sessions when IV30™ has risen from 37.46% on 1-25-13 to now 99.79% or a 166% pop. The 52 wk range in IV30™ is [37.45%, 104.99%], putting the current level in the 92nd percentile. The next earnings release for RPRX is due out ~3-25-2013 (projected), but almost certainly after Mar expiry. That means the vol will continue to rise into that event unless there is a pre-release.

Finally, let's turn to the Options Tab.

Across the top we can see the monthly vols are priced to 93.67% and 106.87%. I note that the Apr vol would be an annual high in IV30™ already. What I see is pretty simple, RPRX is headed for a new annual high in vol and if it cracks 1185, it would be a new multi-year high. My best guess is that RPRX gets very close to that number and goes well above the 52 wk high. Buckle up for another earnings release -- this could be a big mover.

Follow Live Trades and Order Flow on Twitter: @Livevol_Pro
--- DISCLAIMER --
This is trade analysis, not a recommendation.

Legal Stuff:
http://www.livevolpro.com/help/disclaimer_legal.html

Pre-Market/Post Market: 3-1-13

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Blog

Thursday, March 7, 2013

magicJack (CALL) - Vol Diff Opens, Skew Diverges to Upside... Market Reflects Upside Potential on Earnings

Pre-Market/Post Market: 3-7-13

Wednesday, March 6, 2013

Post Market Report: 3-6-13

JC Penney (JCP) - Stock Breaches Multi-year Lows, Calendar Vol Opens; Parabolic Skew Reflects Heightened Tail Risk

Pre-Market/Post Market: 3-6-13

Tuesday, March 5, 2013

Post Market Report: 3-5-13

Safeway (SWY) - Vol Rises as Stock Rises; Tug-of-War Between Analyst and Management. Stock Up But Core Profit Down 80% in 4 Years

Pre-Market/Post Market: 3-5-13

Monday, March 4, 2013

Post Market Report: 3-4-13

Omnicare (OCR) - Vol Diff Opens Between Front Two Months; Divergence Grows After Convergence on Earnings

Pre-Market/Post Market: 3-4-13

Friday, March 1, 2013

Post Market Report: 3-1-13

Repros Therapeutics (RPRX) - Vol Rising in Gapping Stock; Headed to Multi-year Vol Highs into Earnings... Buckle Up

Pre-Market/Post Market: 3-1-13

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